trans funds from onshore to offshore corp account, evasion or avoiding

[locw]

Hi guys,


guess this depends on each jurisdiction but a gerenal question, scenario:


own business in country x with funds in corporate account, setup offshore IBC in company Y with corporate account in country Z. Move large amounts of funds from onshore corporate account (with corp taxs having been paid) to offshore corp account. Then use funds from offshore account for personal expense in countries other than those with business and IBC. Is it personal tax evasion or avoidance?


i've seen a few loopholes like taking a loan from the ibc, but that should only be for a property?


Is this scenario common practice?


thanks

 

[hugger]

Hi guys,
guess this depends on each jurisdiction but a gerenal question, scenario:


own business in country x with funds in corporate account, setup offshore IBC in company Y with corporate account in country Z. Move large amounts of funds from onshore corporate account (with corp taxs having been paid) to offshore corp account. Then use funds from offshore account for personal expense in countries other than those with business and IBC. Is it personal tax evasion or avoidance?


i've seen a few loopholes like taking a loan from the ibc, but that should only be for a property?


Is this scenario common practice?


thanks

If the taxes have all been paid by the onshore company, then why would you want to transfer the funds to an offshore company? (the taxes have all been paid!)


And why try to use the funds from the offshore company for personal expenses? (the taxes have all been paid!)


PLUS


First of all, you will raise a number of big red flags with the onshore IRS because (a) you are transferring a large sum of money and (b) sending it to a tax haven.


Secondly, if you are trying to protect yourself from law suits such as divorced wives and angry creditors, then you have left a big trail of all the money.


I strongly suggest that you have a read of some of the other threads in this forum

 

[dwilson]

I think I understand what you are trying to accomplish and why! Would the offshore company be a subsidiary or parent company of the onshore company? There are a number of ways that you could accomplish this but I would need further details.

 

[locw]

I was thinking subsidiary as the fundswould be used forfurther investment also.


Hugger, corp taxes have been paid on funds, not personal tax, if i were to spend the money in original country on personal expenses then it would be seen as income and liable for income tax. I'm new to this arena as i invested in a business in a foreign country which has really taken off, i'm trying to catch up on the workarounds you guys probably already know of

 

[hugger]

I was thinking subsidiary as the fundswould be used forfurther investment also.
Hugger, corp taxes have been paid on funds, not personal tax, if i were to spend the money in original country on personal expenses then it would be seen as income and liable for income tax. I'm new to this arena as i invested in a business in a foreign country which has really taken off, i'm trying to catch up on the workarounds you guys probably already know of

In order to properly advise you, what nationality are you and in which country is the company located?


Where are the majority of your customers located? Europe, USA or Asia?


Are you a Director and /or shareholder of the company?


Also do you sell a "physical" product that can be easily tracked (through shipping records, etc)? "Product" sales are much easier to be assessed by the IRS for tax purposes.


Or do you sell a service (over the internet)?

 

[locw]

Hi Hugger,


I'm british, company is in peru, it's a limted anon company, i'm shareholder, it's a processing plant dealing with copper and ores, all payments have to go through the books and banks as they are quite large payments, >100k. Currently pay 12% corp tax and no.income tax as of yet as i've not taken anything out. My wife is the other shareholder and is employed by the company, she pays18% income tax on her salary.


Easy things that I know ofcourse are to employ myself at the company like my wife, and say buy a car in the company name. I don't really know what else I can get away with.


Thanks

 

[hugger]

Hi Hugger,
I'm british, company is in peru, it's a limted anon company, i'm shareholder, it's a processing plant dealing with copper and ores, all payments have to go through the books and banks as they are quite large payments, >100k. Currently pay 12% corp tax and no.income tax as of yet as i've not taken anything out. My wife is the other shareholder and is employed by the company, she pays18% income tax on her salary.


Easy things that I know ofcourse are to employ myself at the company like my wife, and say buy a car in the company name. I don't really know what else I can get away with.


Thanks

I have not heard of a "limited anon company" before. I assume that it is a Peru version of a non-recourse "limited liability company".


A quick and dirty solution to your problem would be to establish a company in a low tax jurisdiction. (My preferred option is Hong Kong because all revenue earned from OUTSIDE Hong Kong is non taxable),


1. This Hong Kong company would charge your Peruvian company various substantial consulting fees. The Peru company would therefore have NO profits. (Your Hong Kong company can even charge so much in consulting fees that the Peru company actually makes a loss)


2. Those fees would would be paid to the Hong Kong company. Because the fees paid to the Hong Kong company have been earned outside of Hong Kong, there is no tax payable by the company in Hong Kong.


3. You now need to get the money from the Hong Kong Company to you.


4.(a) You can set up a personal account in your home country (England) and have the Hong Kong company lend you the money. I would suggest that you use it only to buy investments (like property) and use the income from these investments as your living expenses.


4. (b) Alternatively, you can set up a personal account in Jersey, Guernsey etc and accumulate all your funds there. Any future investments then flow back in the opposite direction from Jersey to your Hong Kong company which,in turn, makes the investments.


5. NEVER transfer any funds from Jersey (or any recognised tax haven source) to your home country. It sets off HUGE red flags to your IRS. (PS Hong Kong is not perceived as a tax haven style jurisdiction).


Feel free to ask more questions.

 

[hugger]

Easy things that I know ofcourse are to employ myself at the company like my wife, and say buy a car in the company name. I don't really know what else I can get away with.


Thanks

Without knowing what how your wife and you are actually working and whether you have customers in the UK, I would be amazed if you would be able to claim a company car in England for a company that is operating in Peru.


The Tax code says basically that to claim a company car, then the car must be used "for the purpose of earning income for the relevant company".


So unless you can prove that your driving around England is for the purpose of earning income for the Peru company, you will not be able to claim either the cost of the car OR the running expenses or depreciation

 

[locw]

Hi Hugger,


Thanks for the valuable information, I was wondering how to tie the two companies together to transfer them out.


Another thought I had was to setup a. company abroad, where external income is not taxed, setup another peru company ( it's PLC by the way, got myself confused before) but this new peru company be setup with foreign ibc as the shareholder, not me or my wife. Would it then be a valid reason to send funds back to corp account of mother company?


I assume bank account should be in hong kong also? Are there any other countries that fit the bill as hk accounts need to be opened.in person. I think the dominican rep doesn't tax external income but being in the carib it's likely to set off flags anyway.


Company car would have been for peru as I spend some time there.


If I understand correctly, along with consulting I could also add other services that have no physical items to trace, for example I could setuo a lawyer ibc and have a generous monthly retainer?


On the point of using cash here, even if I were to use the hk bank card to do grocery shopping Here, or other minor expenses with similar lack of.imoortnace woukd be a no-no. But using the card abriad would be ok, up to a point of course.


Excuse the spelling, i'm on my.phone.


Many thanks

 

[hugger]

Hi Hugger,
1.Thanks for the valuable information, I was wondering how to tie the two companies together to transfer them out.


2. Another thought I had was to setup a. company abroad, where external income is not taxed, setup another peru company ( it's PLC by the way, got myself confused before) but this new peru company be setup with foreign ibc as the shareholder, not me or my wife. Would it then be a valid reason to send funds back to corp account of mother company?


3. I assume bank account should be in hong kong also? Are there any other countries that fit the bill as hk accounts need to be opened.in person. I think the dominican rep doesn't tax external income but being in the carib it's likely to set off flags anyway.


4. Company car would have been for peru as I spend some time there.


5. If I understand correctly, along with consulting I could also add other services that have no physical items to trace, for example I could setuo a lawyer ibc and have a generous monthly retainer?


6. On the point of using cash here, even if I were to use the hk bank card to do grocery shopping Here, or other minor expenses with similar lack of.imoortnace woukd be a no-no. But using the card abriad would be ok, up to a point of course.


Excuse the spelling, i'm on my.phone.


Many thanks

I have numbered your questions to make it easier to answer:


1. The companies would not be tied together. The two companies are two separate legal entities that are trading with each other.


2. Not necessary and too complex. You do not need to set up a new company in Peru. Also, if you did set up a new company in Peru with a foreign ( tax haven based) IBC as shareholder, you will run into problems with obtaining new bank accounts because of the new (tax haven based) shareholder. The banks will look on that with skepticism.


3. If you open bank accounts in Hong Kong I would suggest that you use the mighty HSBC bank and also Standard Chartered and Citibank. These are three of the most reputable banks in the world. You will have no problems opening bank accounts with them. They are quick and easy to open accounts with them but , as you say, you need to visit them in person.


Do NOT open bank accounts with dodgy banks in dodgy countries (eg Dominican Republic)


4. Unless you are spending a lot of time in Peru, it would be cheaper to use hire cars and expense them against the Peru company.


5. Not necessary and too complex. All consulting can be charged to the single Hong Kong company. (You can just say that the Hong Kong company has a number of different areas of speciality (legal, accounting, mining resource consultancy etc).


6. Using the Hong Kong credit card abroad is not a problem. Also, always buy your airline tickets and accommodation (which are the major expenses of any travel) on the Hong Kong card. Load the Credit card up with cash so that it is positive in balance and then (when outside your home country) visit a HSBC branch and ask for 5,000 pounds in British pounds to carry home


Do NOT use it in your home country at all. Your IRS will consider the use of your Credit card as potential income for tax purposes.


Some points to note:


1. Everything above is completely legal and above board. If your UK authorities see your structure, then you have nothing to fear. You can not be taxed on any of it.


2. There is no need to use Nominee Directors and/or Nominee shareholders which I believe is way too risky.


3. There is no need for anonymous Debit cards.


4. If you want to make your Hong Kong company more "anonymous" then you can use a Seychelles or BVI company as Director and Shareholder. However you should NOT use Nominees as Directors and/or Shareholders of the Seychelles company. You have nothing to lose from being the personal Directors and Shareholders of the Seychelles/BVI company. (Remember, this is all perfectly legal and above board).

 

[locw]

Many thanks Hugger, greatly appreaciated


one last question to confirm Nº3, it would indeed be better to open the account for the HK company in HK and not say in Leichenstein?


and out of curiosity, is gibraltar viewed as a tax haven also?


thanks

 

[hugger]

Many thanks Hugger, greatly appreaciated
one last question to confirm Nº3, it would indeed be better to open the account for the HK company in HK and not say in Leichenstein?


and out of curiosity, is gibraltar viewed as a tax haven also?


thanks

Firstly, Hong Kong is one of the major business centers in the world (behind New York and London), so it gives great credilbility and respectability to your company.


Secondly, Leichenstein would be considered a tax haven. It would also be more difficult to open a bank account for your Hong Kong company there.


Thirdly, The same would apply for Gibralter. (That is, Gibralter would be considered a tax haven. It would also be more difficult to open a bank account for your Hong Kong company there).