Establishing Off shore company

[Bar1979]

Hello,

I am searching tax heaven location for establishing off shore company to issue service invoices to main company.

With internet searching, there are lots of places with pros and cons. I could not see any healthy comparison. Because even for same locations, there different information.

I am focusing on followings,

No file any annual report or no annual meeting
Bank account with payoneer
Virtual office
Remotely managing
Not domestic director required
%0 tax for all corporate or personal earnings
Privacy

According to my search, cayman, bvi, belize”¦ your advice or any previous post link is appreciated.

 

[JohnnyDoe]

This wouldn't work even 20 years ago

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[Bar1979]

If you mean invoicing main company wouldn't work, According to my experience it works directly‌ or indirectly somehow.

May I ask Why do you think so ?
I you mean‍ about off shore company conditions, I can not say something. due to lack of experience.⁠

What I see is that establishing off shore company possiblities are getting less than before.⁤ But I joined that community to ask about

 

[mud]

What about a simple US LLC based in a non-Sales Tax state?

 

[Bar1979]

Annual and monthly reporting&filing requires additional cost&effort. And franchise tax

 

[clemens]

If you are not willing to pay some money to lower or get rid of‌ your taxes it's not worth to have any setup anywhere.

You know, it costs money‍ to make money! Apply that on all your business doings.

 

[Bar1979]

Yes. You are right. Thats why I am here and asking and researching as well.‌ Its worth or not.

 

[JustAnotherNomad]

"Yes, Mr. tax inspector, this is the company I purchased⁣ those services from. Yes, terribly high invoice, I know. They only hire the best of⁢ the best in the Seychelles."

That's essentially what you're planning. Do you really think you're︀ the first person with this idea and that they haven't thought about ways to prevent︁ that?

 

[Sols]

It's all about tax residence: your‍ own and that of your company. In most cases, the company assumes tax residence where⁠ you live.

Aside from a handful of specific use cases, forming an offshore company today⁤ is pointless. 10-20 or more years ago, there were enough loopholes or weaknesses in enforcement⁣ to make them viable for relatively stable tax evasion. Today, don't bother.

If you want⁢ to pay less tax, move to a place that has lower tax rates.

 

[Bar1979]

So, how about if you found︃ a company in offshore. And ofshore company bought a company in a taxed country .︄ So, is there something abnormal ?

Or tax heaven company bought a goods as a︅ broker and sold to a taxed company ? ( shipment is from source to tax︆ country. )

I do not think so there is something absurd in scenerios above.

But how about customers ? In the︌ end, you will invoice your customer from ofshore.

 

[JustAnotherNomad]

I always put it this way:

[ ] Low costs
[ ] Substantial tax savings‌
[ ] Legal

Unless you move to a new country, you can choose 2 out‍ of 3.
If you want substantial tax savings in a legal way, that comes with⁠ high costs. You can set up a company in a low tax country, but then⁤ you need staff actually running things on the ground.
Big companies can save taxes that⁣ way because they have lots of employees in those low-tax countries. It's not like their⁢ French or American CEO or the manager of the Irish investment fund owning the majority︀ of the shares personally runs the operations in the Cayman Islands.
But as long as︁ you manage the company from Belgium (and that will always be assumed if you don't︂ have local staff, office, real operations, ... in the other country), then there will be︃ tax in Belgium for that company. Otherwise everyone would set up their business in a︄ tax haven and not pay tax where they live. It's not like that, unfortunately.
And even with economic substance in the other country, you may still have to pay tax︅ in your own country due to CFC rules.

If you have the necessary revenue, you︆ could look at outsourcing a part of your business. For example, you could move your︇ customer service into a new company in Cyprus or Ireland or Romania. Hire a local︈ director for the company and local staff. Then you'd have proper substance, and then actually︉ moving that part of your business abroad may actually lead to tax savings.
But you'd︊ have running costs for the company as well, as you'd need staff, you cannot be︋ managing the company from Belgium. The price also has to be "fair", it has to︌ be the "market rate", you can't pay $1M per month to your customer service company︍ in Cyprus when you'd be able to get the same product for $500k somewhere else.︎ Otherwise that would be considered profit shifting.

 

[Sols]

That's fine, but it doesn't change anything in terms of tax. The onshore‍ company still has to pay just like before.

If it's done for the purpose⁣ of evading tax, there are specific laws against that. Look into BEPS, tax residence, and⁢ permanent establishment (and CFC).

It's not about what you think. It's about what︁ your local tax authority thinks when they look into your affairs and starts asking questions.︂

Invoices from offshore companies are in some cases not considered︄ valid expenses.

Not to mention difficulties being able to receive payments to offshore companies, with︅ banking and payment processing being more difficult than ever (and getting worse).

This type of︆ offshore is dead. It's a bygone era. Adapt to the present and prepare for the︇ future.

 

[FDS ADS]

You can consider⁢ the British Virgin Islands.

 

[mud]

Yep. My LLCs do take 1 hour a year each to prepare and send a‍ Disregarded Entity tax return and they do cost about $50 each annually.

 

[Bar1979]

Thanks for your‌ answer. Its really instructive answer. CFC rules are interesting and but our onshore country is‍ not so strict about CFC rules. BUt surely, its a subject that is sould be⁠ considered.

Is that all your cost. How about possibility of virtual office, virtial⁢ bank account ( like payoneer or wise) and remotely managing ? Do you fill forms︀ by yourself ?

Thanks. I will. But do you have any idea of possibility of virtual office,︂ virtial bank account. It seems that opening bank account has been getting difficult.

Anyway, I think its a forum that I︅ can learn about future trends.

 

[mud]

Yes, we do fill in our own LLC tax forms but︁ they're as simple as adding a few names, addresses, ID numbers and adding the 'Disregarded︂ Entity " line. No (or few) financial figures are required to be submitted. Our agent︃ handles the franchise fee, state lodgment, and registered addresses. Its pretty cheap <$1000 a year︄ for a group of companies including registered addresses and mail forwarding.

Banking is largely free︅ except transaction fees. For example Wise allows citizens of many countries to maintain USD accounts︆ without cost. Our US banks are all free too (4 different banks).

I do maintain︇ a US phone number at $10 a month but that's for dealing with US customers.︈ Of all my phones the US is the cheapest.

One of the nice things about︉ a US LLC though is that you can easily buy US based products and services︊ which are usually much cheaper than in foreign countries, especially software.

 

[JustAnotherNomad]

CFC rules are irrelevant for most people. CFC rules are relevant when you have⁠ proper operations (substance) in another country.

Take Switzerland as an example: Switzerland doesn't have any⁤ CFC rules. That doesn't mean you can live in Switzerland and pay no tax because⁣ your company is registered in a zero-tax country.
The fact that you work/manage the company⁢ from Switzerland will trigger tax in Switzerland, no need for CFC rules.

A typical example︀ where CFC rules would be relevant is if your trademark was held by a company︁ in a zero-tax country and you have 1 employee in that country.
That employee could︂ be enough substance (you can prove you're not doing any work for the offshore company︃ from the country where you live) - in Switzerland that would be fine.
In other︄ countries, this could trigger CFC rules, so you have to pay tax, simply because you︅ own the offshore company, even though you don't do any work for the company yourself.︆

 

[Gediminas]

Hey,

Usually, tax⁢ rules of the country where the main company is established are important and help to︀ decide about jurisdiction.

If the main company is in Europe, it is very likely that︁ local authorities will not allow deducting expenses for corporate income tax purposes if expenses are︂ incurred towards a “blacklisted” offshore country.

Alternative to offshore islands might be non-resident companies in︃ high tax jurisdictions such as the Netherlands (closed type CV) HK, US disregarded entity for︄ tax purposes. The income of such companies is also not subject to tax.

On the︅ other hand tax authorities of the main company might also understand that these are not︆ standard, taxable entities.

Talking about “offshore” islands, there are plenty of options, but I would︇ exclude those which are included in various international blacklists (from a banking perspective or tax︈ perspective) and those that have very extensive KYC level or other bureaucratic rules.

I hope︉ this helps. 😉