Are International Business Companies in Tax Havens Dead?
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- เผยแพร่เมื่อ 2 ก.ค. 2020
- nomadcapitalist.com/offshore-...
While there are still some reasons to have an international business company, it has developed a bad reputation due to Western governments who do not like competition. So the days of zero tax and zero reporting are coming to an end for business owners who want to move their operations offshore.
Andrew Henderson and the Nomad Capitalist team are the world's most sought-after experts on legal offshore tax strategies, investment immigration, and global citizenship. We work exclusively with seven- and eight-figure entrepreneurs and investors who want to "go where they're treated best".
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You just explained why paying the high costs of starting a UAE free zone company are probably worthwhile. It will cost you 15x as much to obtain the residence permit needed to operate a company from the Bahamas and pass the new economic substance test rules as it will to set up business in Dubai and it is a lot easier to import the workers you need for any tech company in Dubai as a free zone company than it would be in the Caribbean. And the Bahamas won't give you the plethora of double tax treaty benefits that the UAE offers. The UAE's oil reserves make them important enough not to be blacklisted and they have enough useful double tax agreements to operate a Saas through independent cloud operators and subsidiaries in places like Canada, the UK, Ireland, Georgia, Armenia, and Singapore to give an app the ability to service markets all over the world without a permanent establishment or with benefits from transfer pricing studies and royalty regimes associated with those subsidiaries that will give them essentially zero tax treatment, or maybe 1 to 2% tax rates even when that service is being used by people in countries as vast and adverserial as the United States and Russia.
If one delivers services worldwide needing agility and little or no paperwork, IBC’s can still be a solution. Totally agree with the banking difficulties though (both to open and to operate the IBC’s accounts in certain jurisdictions). Sometimes it pays off to buy a “combo”(existing shelf-company with an active business account), even knowing it will cost some 5x the cost of incorporating an IBC from scratch...
The information in this video answered some of the questions I've had (for some time) about IBC's.
Very true. Almost impossible to open a decent bank account for an IBC.
Insightful video! Thank you Andrew!
Interesting video concept and recall while I was younger seeing some advertisements in magazines about these international business structures. Keep in mind this was circa 2000 to 2003 and even at that time thought that it seemed almost "too good to be true" for all the benefits that were promised to people that went through this process. Years later I now realize why, but at the same time I assume it had perhaps a little influence on you Andrew launching your company being in a line of business that overlaps this type of concept. People could look at it in the same way that myspace inspired facebook or napster inspired spotify/soundcloud, often the very first original concept businesses are not the ones that take off but the second or third concept that follows. Also, interesting idea, the concept of "Nomad" seems to be a great keyword with certain types of businesses and connects well with Generation Y in the sales department. In Estonia where I live for example they are currently starting a "Digital Nomad Visa" which contains this keyword and embraces this concept of digital nomads.
So it all boils down to bank accounts. If it wernt for the issues of banking they'd be great. Pretty much all the billion dollar cryptocurrency companies are incorporated in somewhere like Caymans, Seychelles, BVI etc because they can operate huge businesses with zero care about banks as all their salaries are paid in bitcoin and customers pay for their services in crypto too so IBCs are great. There are a few small virtual banks popping up now servicing these types of companies which we will probably see progress as time moves on too
Bank accounts are the tip of the iceberg. There are also permanent establishment issues, the new economic substance test regimes, the clout to avoid banking issues or not, and the ability to benefit from double tax treaties. Where are your personnel working from is a vital question thanks to the new economic substance tests. Where is the IBC registered to operate is another question. I mean yes you are BVI corporation, but are you only authorized to do business in the BVI, or have you registered as a foreign corporation elsewhere? You haven't? Where are your personnel in the BVI, how many of them are there? Where is your managing director located? Who is that person? What ownership stake do they hold in the company? Do they have checkbook authority or are they merely a nominee director ie are they a sham?
Most of the jurisdictions which had IBCs excluding the truly territorial tax jurisdictions, ie Panama, Hong Kong and the like will tax the worldwide profits if the business is actually operating in their jurisdiction, and if you aren't, well where are you registered to do business otherwise?
It takes a lot of planning of various parts to avoid taxes as a multinational corporation which is what you personally must become to avoid taxes.
Find a video explaining the Double Irish with a Dutch Sandwich or the Double Irish with a Single Malt to begin understanding the kind of thinking that is actually involved. If you are an American add to that complexity GILTI and Subpart F, but also add to it foreign tax credits, FBAR, FATCA, and the foreign earned income exclusion. If you are in the EU -not the UK, Brexit was clearly about their overseas tax havens, but the rest of the EU, get ready for something like the US worldwide tax regime to take effect soon, and understand there are a lot of moving parts to consider.
You have to think like a multinational corporation's tax attorneys and tax consulting accountants. You need to be reading KPMG, Deloitte, and PWC reports on various countries corporate and personal income tax regimes. You need to understand how to obtain residency in favorable tax jurisdictions. You need to figure out which countries have favorable double tax treaties with the country where you situate you primary business, and which countries have regimes that will allow you to have subsidiaries with favorable transfer pricing studies to hire employees at the lowest wages and get the best performance while paying the least tax on the profits those companies must show for the services they provide to the primary company. You must figure out which country has the economic might to avoid issues with the EU blacklist. You need to figure out how to get money out of major markets with withholding regimes like the 30% tax the USA imposes on most transfers of money out of the country, except to jurisdictions who benefit from favorable double tax treaties and you must probably find such countries which have favorable double tax treaties with your primary country for your business because they likely aren't the same country.
You also need to figure out how to get proper transfer pricing studies done to make sure that the countries in question do not take issue with transfers out of their country of the profits those subsidiaries earned without taxes inside those nations being imposed.
You are going to need to understand IP licensing, loans and interest payments for this, or you are going to need to find low tax jurisdictions for this to work.
There are a million moving parts to international tax planning, and that is what Andrew is trying to say, without saying it.
You can figure this all out on your own if you are a lawyer or an accountant working at an international tax planning consultancy. If you aren't and you have the 120 IQ needed by most to complete graduate school, you can probably figure it out too, but it will take a lot of reading and research. It will probably take hiring translations for various treaties and statutes as well because there will be a lot of languages that laws and treaties you need to worry about are written in that you probably won't be able to read.
Hell there may even be treaties in effect as far as one country is concerned that another country disregards that would be a huge advantage to you which you will need to figure out how to use regardless.
@@jeremybarlow2291 You know your stuff. Valuable comment.
@@jeremybarlow2291 Your various comments are among the most enlightened I've ever seen in response to one of Andrew Henderson's videos.
The Caymans is not a low-rent IBC.
@@jeremybarlow2291 I dont expect you to hold my hand. What I will ask of you, is what recommendations of resources can you give me to educate myself? Any books, internet resources, etc to educate myself on everything you said? I am already saturating myself in this day and night, but looking for more education.
“Men give me credit for some genius. All the genius I have lies in this; when I have a subject in hand, I study it profoundly. Day and night it is before me. My mind becomes pervaded with it. Then the effort that I have made is what people are pleased to call the fruit of genius. It is the fruit of labor and thought.” - Alexander Hamilton
Would like to know more about other US territories like Guam regarding their viability as a tax haven. Hard to find straightforward information anywhere except old articles from the early 2000s online. Please do a video on this! It would be so helpful!!
Thanks for the idea, Susan.
I don't know, but your shirt looks really comfortable
It is interesting Belize now compliant with OECD and is not offshore jurisdiction anymore. No IBC´s anymore. New companies onshore and need physical presence. What is overlooked you can manufacture widget in Belize and export your product tax free! Many benefits there none of us realized possible. Belize emerging totally new ! :)
This is the kind of thinking that has to be done in regards to any international tax strategy. You have to find the exceptions to the exceptions for your specific use case. I mean the EU blacklist is very short right now because most former IBC jurisdictions have adopted economic substance tests or similar criteria that keep them off the OECD radar, or the benefits accrue in countries with some kind of clout to avoid OECD's ire like the UAE, but if you aren't looking for the next Double Irish with a Dutch Sandwich for your specific need, you will not find it.
I’m a UK citizen currently looking to move my entire business offshore. Since it trades only online and exists in the cloud I don’t see any reason to not start an IBC. Favourite options are currently Panama or Nevis. Would like to go with Cayman Islands as that is where I would ultimately like to live but at the moment its out of my price range.
Have you examined withholding taxes and double tax treaties? Have you looked at new economic substance regulations?
Jeremy Barlow yeah, and I don’t think it applies to me.
C M thank you I’ll take a look. I don’t plan for my offshore company to own anything in the UK so may not apply but I will research this anyway 🙂
Tough times like this with pandemic really making others barely survive others are thriving.
You say in your introduction that you only help seven and eight figure income earners. Is there nothing for us little folks?
The foreign earned income exclusion & the Dubai digital nomad visa for less than $300 as long as you are earning more than $50k a year & can work from anywhere. Getting a corporation that can pay you without having to pay social security withholding taxes is a bit more tricky.
Would be grateful If you could do a video about real estate in Eastern Europe. Thanks for the free content, keep up great work.