UK LLP or US LLC to hold offshore accounts

[Paul9898]

Sir,

I have several offshore brokerage accounts in various countries all under $250,000 USD. But in my name. I want to get them in company name because of the OECD CRS reporting. My goal is simply to have them in a company name. I am not trying to hide anything. Nor am I wealthy and therefore I want to use something simple and cheap.

Would the UK LLP or USA LLC be good for this purpose? I am not American.

I have no experience using these structures. I would prefer if the company that sets them up has no knowledge of my investments.

Any suggestions?

Thanks very much!

Paul

 

[Martin Everson]

Which countries are they held in and which country are you resident?

CRS has already started and moving now may not help. You may also find that depending on the broker they will only allow first party transfers of securities i.e Saxobank.

 

[Paul9898]

Which countries are they held in and which country are you resident?

CRS has already started and moving now may not help. You may also find that depending on the broker they will only allow first party transfers of securities i.e Saxobank.

Which countries are they held in and which country are you resident?

CRS has already started and moving now may not help. You may also find that depending on the broker they will only allow first party transfers of securities i.e Saxobank.[/QUOTE

I am Canadian. The accounts are Singapore, Hong Kong and Switzerland. I phone and spend close to an hour with the Canada Revenue Agency. I wanted to know what the thresholds of reporting are. They told me they could not find that information. It is my understanding there are thresholds for reportable accounts which each country sets. For Japan I was told $500,000 USD. Obviously if one had an account with $1,500 and earned $10 interest the tax authorities would not go to the effort to pursue this. I am trying to find what this threshold is. Thanks!

 

[Paul9898]

Which countries are they held in and which country are you resident?

CRS has already started and moving now may not help. You may also find that depending on the broker they will only allow first party transfers of securities i.e Saxobank.

Further....My thought was to use a US or UK structure just to give myself a measure of safety. Martin do you have any suggestions? Thanks

 

[Martin Everson]

Well your situation might not be as bad as you think. Worst case you are looking at fines and interest as CRA rarely send people to jail for tax issues who fully cooperate in non-serious cases. Seems odd the CRA could not tell you the threshold as its not a complex question.

The issue as I see it is that information will start being exchanged in less than 4 weeks from now for 2017 account data. I have to assume you have had income and have not included this income in form T1135. As I understand it all foreign property over CAD 100k must be reported on form T1135 - so that is the threshold. Foreign property includes bank accounts held abroad, debt securities and shares, real estate and other intangible properties.

T1135 Foreign Income Verification Statement - Canada.ca

Remember you may already have been subject to withholding tax at the broker on dividends and interest which you can use to offset the tax you owe in Canada due to double taxation. Remember Canada has a foreign income tax credit system which is helpful. I cannot envisage that you moving the assets now to another broker even outside CRS would make any difference if the data is already in process of being reported to the CRA anyway.

- Singapore starts reporting in September 2018 for year 2017
- Hong Kong starts reporting in September 2018 for year 2017
- Switzerland starts reporting in September 2018 for year 2017

Your best option is to seek professional advice from an accountant in Canada and amend your 2017 tax return. Perhaps the brokers may not report much also, so ask them also what exactly they will report. Remember it is not the end of the world to correct a tax filing as the CRA will respect honesty. It is far better to not turn the situation any worse many people correct tax returns even large well known companies .

btw. Whats total sum involved 1000's or millions?

 

[Paul9898]

Approx. one million. I appreciate you taking the time to write such a lengthy reply. Thanks very much

 

[Martin Everson]

Approx. one million.

That is not an insignificant amount of money . However it is the income that matters more and not already capital depending on below scenarios .

Scenario 1:

I don't know how much of that 1m is already taxed capital (i.e taxed somewhere at some point) but lets assume a large amount of it was already taxed somewhere and you have used it to generate income via the offshore brokerage accounts. For example lets say you made 20k last year in dividends or interest after withholding tax applied by broker. Then it is not such as serious tax case at all or very interesting to CRA. The max fine you will get is possibly 200% of the amount of income tax avoided - not a big deal after deduction for withholding tax etc are applied.

Scenario 2:

Lets assume that the entire 1m has never been taxed and its all income you have used to make further income via the brokerage accounts for years. This would be a more serious tax case and would likely be a 5 year jail sentence, fine and tax to be repaid if you do not cooperate with CRA. If you throw in fraud charges then up to 14 years in jail .

Conclusion:

Being that the information is weeks away from being exchanged for 2017 getting professional advice should be sought with i.e KPMG etc. It sounds worse than it actually is but a good local accountant firm will easily resolve and negotiate a good settlement. If you are first to come forward rather than CRA coming to you then you will get an easier ride.

 

[Martin Everson]

When you speak to a tax advisor ask about the Canadian Voluntary disclosure program. It is not a big deal and nothing to lose any sleep over as even your former prime minister Brian Mulroney went through this program . You could also avoid a criminal conviction which is a bonus.

Voluntary Disclosures Program – Introduction - Canada.ca
Canadian Tax Amnesty | Faq

 

[Paul9898]

Martin thanks very much for your help.