Freelance crypto dev

[BarleyMalt]

Hi everyone,

I was wondering if you could give me your feedback on this situation.

Let's say that a friend is a developer in crypto. He has incorporated with an offshore company in permissive juridiction to raise capital from VCs, in order to avoid cumbersome regulatory oversight regarding his business. You know, those countries where you get little umbrellas in your cocktails.

Now, as he's developing the project, he wants to get a "clean" source of revenue to justify his living standards, and stay under the radar generally. He plans to live in a Baltic country, where you can have a company with 0% profit tax, with only a withholding tax on dividend distribution. His plan was to bill his offshore comp, get paid in crypto and/or in fiat, and distribute himself a salary + dividends after that they accrue in the company.

Do you think there's any risk regarding this way of doing? Given that there's no tax on profits anyway, the offshore comp is mainly here to grant freedom regarding his activity.

 

[avalanche]

BarleyMalt said:
Hi everyone,

I was wondering if you could give me your feedback on this situation.

Let's say that a friend is a developer in crypto. He has incorporated with an offshore company in permissive juridiction to raise capital from VCs, in order to avoid cumbersome regulatory oversight regarding his business. You know, those countries where you get little umbrellas in your cocktails.

Now, as he's developing the project, he wants to get a "clean" source of revenue to justify his living standards, and stay under the radar generally. He plans to live in a Baltic country, where you can have a company with 0% profit tax, with only a withholding tax on dividend distribution. His plan was to bill his offshore comp, get paid in crypto and/or in fiat, and distribute himself a salary + dividends after that they accrue in the company.

Do you think there's any risk regarding this way of doing? Given that there's no tax on profits anyway, the offshore comp is mainly here to grant freedom regarding his activity.
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there's a major detail missing, does your friend have a real director and a few other employees in that offshore country? if he doesn't I would worry more about Baltic country finding out about this offshore entity regardless of whether he will do transactions or not

 

[BarleyMalt]

avalanche said:
there's a major detail missing, does your friend have a real director and a few other employees in that offshore country? if he doesn't I would worry more about Baltic country finding out about this offshore entity regardless of whether he will do transactions or not
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I don't think so, as it's one of those offshore 0% tax companies provided you don't have activity there.

 

[avalanche]

BarleyMalt said:
I don't think so, as it's one of those offshore 0% tax companies provided you don't have activity there.
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Then your friend may have a risk that tax authorities of a Baltic country can claim that his offshore company is a tax resident of that country and has to pay local taxes regardless of where he is incorporated

 

[BarleyMalt]

avalanche said:
Then your friend may have a risk that tax authorities of a Baltic country can claim that his offshore company is a tax resident of that country and has to pay local taxes regardless of where he is incorporated
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Thanks, well in this case, as the corporate income tax is 0%, and they don't pay dividends, there shouldn't be any tax penalties, right?

Also, how does tax residency for companies with teams spread worldwide are decided and where there is more than one shareholder/director, that live in different countries? I know that taxmen think otherwise, but this is a good use case of offshore companies.

 

[avalanche]

BarleyMalt said:
Thanks, well in this case, as the corporate income tax is 0%, and they don't pay dividends, there shouldn't be any tax penalties, right?

Also, how does tax residency for companies with teams spread worldwide are decided and where there is more than one shareholder/director, that live in different countries? I know that taxmen think otherwise, but this is a good use case of offshore companies.
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usually tax residency is defined by majority of the decision makers in the company. in standard cases decision makers are the directors. in case you have 50/50 then I dont know, perhaps there is a tie breaker rule in OECD framework

you might be right about tax rates but I would suggest to consult a tax expert in that Baltic country

 

[clintk84]

Well I posted this solution to another person
How much would you consider as a "clean" source of revenue to justify his living standards?

I could turnover $2mil-4mil though my yacht manufacturing business
Which is safe as the money is collateral backed by the yacht asset itself.
You have ease of movement / transfer / source of funds.

We can happily take crypto as the investment to build the yacht, where you take the yacht as the purchase.
We build the yacht and register it in the BVI (your collateral).
You sell the yacht for profit. The sale of the yacht is a valid proof for source of funds (clean money)