Using Offshore Holding Company To Avoid Tax

[DeletedUser9]

Hypothetical situation:

You live in a country where you are taxed on worldwide personal income at 52%

You own a successful business (Call it B1) which does business on a global level and very little/none within your own country.

B1 is set up and registered in your own country where corporation tax is set at 12.5%

You don't like the idea of paying 52% on any income so you set up a holding company (B2) in the cayman islands which will have a 100% stake in B1 which is registered onshore.

B1 makes profits of $10,000,000 which it sends to B2 and B2 pays you a personal income of $1,000,000 which you are taxed $520,000 and left with $480,000.

$9,000,000 is left in a bank account in the caymans registered to B2 where there are no taxes.

Can B2 buy assets for your personal use ? such as cars, property etc

I know most countries tax residents on worldwide income but technically on a personal level only $1,000,000 was made.

Is this completely legal ?

 

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[camcam]

I think it's legal but frowned upon. Different countries have different rules and either way they will do what they can to make you pay tax. In the UK it's called a 'legal loophole'


Sent from my iPhone using Tapatalk

 

[Trivium iz rC]

Your best bet is to talk with a tax attorney/tax professional.

I follow a couple guys on using foreign corporations to minimize my tax liability since the USA taxes you on your worldwide income. Within the next year I'll be in the process of moving one of my corporation to Hong King & moving my websites to servers in the netherlands to make everything complete.

Send a message to @GlobalWealth & also google Andrew Henderson from NomadCapitalist.


GL

 

[exclusives88]

Is your plan to send money from the onshore to the offshore entity and use that money to pay for assets for personal use? How do you plan on sending money to B2? Will it be a form of a distribution or some type of payment for service? If it is the former, B1 will still be taxed on pre distribution income.

Another note is that setting up an offshore entity may have misc filing requirements that you should be aware of so it can be administratively burdensome. There are many tax forms you will need to file if you set up an offshore entity depending on how the entities are structured within your organization (Form 5471, 8865, 926, FBAR...etc).

I can guide you towards the right answer. I'm not an expert but I am a CPA with 6 years of experience in partnerships, structuring deals around compliance/taxes.

 

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[DreamsCameTrue]

I just looked into this for a while, and I'm currently in a holding pattern on the project while working on other things. but here's my advice to you-

The guy on this forum "GlobalWealth" is a pretty useful resources. He does a phone consult for a few hundred bucks and it is worth it. He will walk you through a lot of these beginner questions. Don't join his email list, because he hard-sells some convention in the caribbean and it's super annoying. Also, there's a bunch of political stuff in the newsletters that is useless and seems to be intended to get you all pissed off at the government. Time spent being angry at the government (or anything really) is wasted time that you will never get back. But the phone call is very useful.

There's other people like this too, but a lot of them sort of push you towards a "international lifestyle" and renouncing citizenship, etc. It's pretty extreme IMO if you're just looking to get some tax relief. The Nomad Capitalist guy is one of these extreme ones.

Diane Kennedy is a CPA and specialist in this area as well, but her office people are really hard to work with. If you can get Diane directly you might have something, I'm not sure. I was not able to successfully navigate all the hoops her handlers want you to jump through. Maybe you can do better than me.

In the end, I found someone in Canada who has a really interesting strategy that I am going to go with. It's a bit costly to get started, so Im gonna do it when I really have a large amount coming in all the time.

My impression of this "offshoring industry" so far is that they are some pretty smart people, but they are using the marketing techniques that one would use when marketing to your average dumbfuck. I dunno, maybe it works. It doesn't speak to me tho. Can you speak to self made millionaires as if they were average dumbfucks? MAYBE!

Also, some of these folks are REALLY agressive on their strategies and I can't be sure some of it is totally legal. I'm not an expert, but if you read even the simplest wikipedia version of FACTA, lots of stuff they suggest seems to run afoul of it.

 

[BlakeIC]

bookmarked for when i am making enough money to where i am affected

 

[JamesSJ]

Deleted

 

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[hestati]

Well, I was in this kind of business, kinda...

To make it very simple, think about a company as a person. What you described CAN be done, but it must be properly structured. I can right away think about at least 2 ways to do it. I will talk about just one.

B1 is registered and all it does is sets up the deal, like a brokerage company. Let's say you are painting boats. B1 sets up a contract and then gives it to B2 to do the actual job. B1 keeps 10% of the money, it goes to your pocket. 90% of the money goes to B2 and are not taxed.

Problem is, how to get money out of B2. No B2 cannot buy you houses and cars and all in your country. In fact, there IS a way, but it is "grey", in fact it is very very grey. This way is considered tax evasion, but it is extremely hard to prove it unless you act like an idiot and give them all the proves.

Now can B2 buy houses in other countries which you can "use sometimes"? Sure. This is more like tax avoidance, which, if you act like an idiot, can be considered tax evasion.

Trust me, these things are not that complicated as "offshore advisors" want you to believe. Most of the time there is nothing illegal either. It still surprises me seeing companies paying taxes on their offshore sales when it can be easily avoided by setting up 1-2 legal offshore corporations.

 

[GlobalWealth]

Your best bet is to talk with a tax attorney/tax professional.

I follow a couple guys on using foreign corporations to minimize my tax liability since the USA taxes you on your worldwide income. Within the next year I'll be in the process of moving one of my corporation to Hong King & moving my websites to servers in the netherlands to make everything complete.

Send a message to @GlobalWealth & also google Andrew Henderson from NomadCapitalist.


GL

I wouldn't advise HK as it is expensive to set up and maintain. The exception is if you have huge clients and need a more reputable address for your client invoices then you can consider HK or SG. Otherwise I'd advise going pure offshore. Much simpler and less costly to set up and maintain.

 

[GlobalWealth]

Is your plan to send money from the onshore to the offshore entity and use that money to pay for assets for personal use? How do you plan on sending money to B2? Will it be a form of a distribution or some type of payment for service? If it is the former, B1 will still be taxed on pre distribution income.

You are correct, one must be very careful with using an offshore/onshore structure purely for shifting profits for personal use. You need a legitimate business purpose. For example owning IP in your offshore company and having your onshore company pay a lease.

Another note is that setting up an offshore entity may have misc filing requirements that you should be aware of so it can be administratively burdensome. There are many tax forms you will need to file if you set up an offshore entity depending on how the entities are structured within your organization (Form 5471, 8865, 926, FBAR...etc).

This is also true. You definitely need a tax expert on board to make sure you are filing everything properly. It can be administratively burdensome as noted, but if you are saving 100s of thousands in taxes it is certainly worth it.

 

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[GlobalWealth]

The guy on this forum "GlobalWealth" is a pretty useful resources. He does a phone consult for a few hundred bucks and it is worth it. He will walk you through a lot of these beginner questions. Don't join his email list, because he hard-sells some convention in the caribbean and it's super annoying. Also, there's a bunch of political stuff in the newsletters that is useless and seems to be intended to get you all pissed off at the government. Time spent being angry at the government (or anything really) is wasted time that you will never get back. But the phone call is very useful.

Thanks for the vote of confidence. Yes we offer initial consultations and full coaching.

And yes, we sell stuff to our mailing list. Guilty as charged. We make money.

There's other people like this too, but a lot of them sort of push you towards a "international lifestyle" and renouncing citizenship, etc. It's pretty extreme IMO if you're just looking to get some tax relief. The Nomad Capitalist guy is one of these extreme ones.

Side note, we don't push people for an international lifestyle. We do offer many solutions for people who are looking for that though. Clearly it is not for everyone.

Diane Kennedy is a CPA and specialist in this area as well, but her office people are really hard to work with. If you can get Diane directly you might have something, I'm not sure. I was not able to successfully navigate all the hoops her handlers want you to jump through. Maybe you can do better than me.

Diane is excellent. She is very busy and normally works from referrals so she can be hard to get. I can do an intro though if you want.

Also, some of these folks are REALLY agressive on their strategies and I can't be sure some of it is totally legal. I'm not an expert, but if you read even the simplest wikipedia version of FACTA, lots of stuff they suggest seems to run afoul of it.

You are 100% correct. Much of the stuff in the offshore realm is aggressive at best, purely illegal at worst. I have seen plenty of both. FATCA is a maze that must be properly navigated. If you are unfamiliar you are guaranteed to run afoul of it.

 

[hestati]

I must probably also mention that everything becomes much more complicated when you are US citizen. Still can be done, but a bit more complicated.

 

[GlobalWealth]

I must probably also mention that everything becomes much more complicated when you are US citizen. Still can be done, but a bit more complicated.

Valid point. For Americans it is much harder. For the rest of the world, it is like a hot knife through butter.

 

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