Question about offshore and capital gain tax

[euinchina]

There is no capital gain tax in HK.

Can I incorporate a BVI (or any other tax haven) to buy over my HK company for, say, at the price of 10 years earnings (PE ratio of 10), and then have the BVI company make payments to me on a monthly installment basis, effectively moving monthly profits back to myself but tax free due to them being capital gains.

Is this workable?

 

[CyprusLawyer101]

What you wrote is nonsense to me. I will remain to see if anyone can make any sense.

 

[Marzio]

CyprusLawyer101 said:
What you wrote is nonsense to me
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He is probably talking about acquiring the HK company using an offshore company and receive capital gains tax free

 

[MiltonStone]

It's a risky game you are playing there. You better check it with a local tax firm.

 

[euinchina]

CyprusLawyer101 said:
What you wrote is nonsense to me. I will remain to see if anyone can make any sense.
Click to expand...

John owns Company A in HK
New offshore Company B acquires Company A on a monthly payment plan
Company B pays John $X every month. John doesn't pay tax because they are capital gains.

1) Will it work if Company B is unrelated to John?

2) Would it still work if UBO of Company B is John?

3) Would it be easy for HK tax bureau to find out the UBO of Company B?

 

[CyprusLawyer101]

euinchina said:
John owns Company A in HK
New offshore Company B acquires Company A on a monthly payment plan
Company B pays John $X every month. John doesn't pay tax because they are capital gains.

1) Will it work if Company B is unrelated to John?

2) Would it still work if UBO of Company B is John?

3) Would it be easy for HK tax bureau to find out the UBO of Company B?
Click to expand...

Thanks
The drafting of the contract would be important in determining this. Hire-Purchase arrangements are structured similarly and the income qualifies as interest. Valuations are also relevant here.

If it was a once off transaction then income would have qualified as capital gains so I dont see why it couldnt work if you paid in installments.

At first glance it shouldnt make any difference who is controlling the buyer in charcterizing the income. Unless the intention is to launder funds from the buyer's side in which case the ownership of company B would be relevant in determining an offence - however this is not a tax/capital gains question but something different.