Many of us have the impression that we will be automatically tax-free if we are using a BVI or a Seychelles IBC to do business. That is really not the case. In many of our encounters with our customers, most of them would ask if they are tax-free if they register an offshore company with us. Usually, we will reply the customers it depends on how you use it.
There are a few conditions to fulfill in order for you to be tax-free.
- The first question that the corporate owners have to ask themselves is if their country has CFC rules (controlled foreign corporation). What is this? You will hear this term very often. It means that if you are a citizen in Japan, the US, Russia or India, you need to declare to your own country that you own a foreign company in oversea. In this case, setting up an offshore company WILL NOT help your situation. However, that does not mean that you cannot set up a Panama Foundation with all the nominee founder and council members in place. All you need to do is to make sure that you are the protector of the foundation and you will "sell" all your offshore companies to the Panama Foundation. What a Panama Foundation is important? Because the protector does not need to register with the authority.
- Will you be owner the offshore company? Will you be managing the offshore company directly? Will the offshore company be doing any business onshore? In these 3 questions, what are we trying to pinpoint is the ownership, control, and operation of the offshore company. If you are using the offshore company in onshore, the income is rightfully taxable even if you don't own it or if you don't control it. Some countries may allow capital appreciation to be tax-free on certain investments but you have to check with the relevant authorities. As for ownership and control, use our nominee service will solve your problem. But there is a drawback which I think not many of these offshore incorporators will tell you. If you are using the offshore company to open an offshore bank account, the nominee shareholder and director have to declare that they are "nominees" and you are the actual beneficiary owner. However, there are ways to solve this problem as well. This email address is being protected from spambots. You need JavaScript enabled to view it. to find out more as we only share this information with our customers.
- Does your offshore company has any of its bank accounts in your country of residency? if yes, it is not advisable if you declared yourself as the director and shareholder of your offshore company. If your "nominee" is a citizen of your country, it will not work as well. So appointing your siblings, friends or spouse will not give you a better conclusion. The best is to get us to open an offshore bank account for you in oversea and we may be able to open an offshore bank account for you without "meeting the banker". Hence, you will be able to open a bank account remotely.
- Finally, the points above are the general framework. If the amount involves is big enough, it will be good to give your tax accountant a call. We can sell you a solution to allow you to be tax-free in many ways but the business model must be suitable.
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