Offshore Inc. for tax-avoidance trading?

[agin1415]

From the IRS site:

Topic 853 - Foreign Earned Income Exclusion — General

If you are a United States citizen or a resident alien who lives and works abroad, you may qualify to exclude all or part of your foreign salary or wages, or amounts received as compensation for personal services rendered from your income.

If you are a United States citizen with a tax home in a foreign country and you meet the bona fide residence test or physical presence test, you may exclude up to $80,000 for the year 2004 and thereafter.

Resident aliens of the United States with a tax home in a foreign country may be eligible for the exclusion if they meet the physical presence test, or if they are citizens or nationals of a country with which the United States has an income tax treaty with an applicable nondiscrimination clause, and they meet the bona fide residence test. Specific guidelines for these two tests are covered in Topic 854.

The maximum annual exclusion is prorated on a daily basis if there is any part of the year that you do not qualify under either test.

 

[science_trader]

Quote from psytrade:

Its a reality, I already have the system that makes 60% annually. This is a 100k account compounding while paying corporate tax of 18%. See you still get rich, just wait a while.

Just try your compounding WITHOUT TAXES and you will understand perhaps better why people try to defer or avoid taxes...

 

[psytrade]

Im not debating that either. If your good youll get rich either way.

 

[2cents]

perhaps, but i'll need to be so much better to beat an 18%+ tax spread don't u think? i mean, i'm exaggerating a bit but if we follow your line of reasoning, why bother looking for tighter spreads, leverage etc, why don't we just buy currencies cash from our bank teller at 1%+ commission rates etc... since we'll get rich anyway...

do u see the point now??

 

[psytrade]

I guess you got your 2cents in, so there must have been a point in there.

 

[2cents]

Quote from psytrade:

I guess you got your 2cents in, so there must have been a point in there.

i was just trying to level with u mate ;-))

 

[2manywhiners]

You can trade with an offshore account, (100% positive you can in Switzerland, but not so positive about anywhere else) and without any major (note that i said major) problems with tax law. However there are rules that have to be followed. (This is not a complete list by any means, and I'm offering absolutely no professional advice here.)

You can't have any of your own money in the account. None.

The account has to be held by a citizen and/or legal entity of Switzerland.

You must complete numerous legal forms (and I mean a Webster's Dictionary) for being an overseas account manager of foreign funds traded on US exchanges.

You Must have certification as an account advisor with the SEC. (Not sure exactly what you need, but it can be the nail in the coffin if you screw it up)

You then pay taxes on your salary (as your income is that of a foreign company's, there are things you must do in order to properly file with the IRS. Not sure but I think the company has to pay some sort of a tax or tarif for employing a US citizen, if not them then its you.) Definately don't screw this part up, as it is the whole purpose of trading the foreign funds anyway.

 

[bellman]

So how much is a daytrader taxed for realized gains in a year? 20%, 30%, 40%???

Thanks

 

[Free Thinker]

Quote from bellman:

So how much is a daytrader taxed for realized gains in a year? 20%, 30%, 40%???

Thanks

the same as your ordinary income tax rate.

 

[andrasnm]

I ran a domestic C Corp while I had my business and it is a logistical nightmare in terms of state and federal returns and compliance.
I do not know the amount of red tape for offshore heaven foreign corporation s but I would wager that there is some overhead involved. If your account size and pocketbook allows it by all means - go for it, but I suggest to you looking into all the costs involved in running a Co.

Quote from malaka56:

Hi, I am completely new to trading, so this might be a dumb question, but I'll ask it anyway.
Do any of you use legal structures based in other countries to avoid US taxes on your trading?
A lot of business based in Bahamas, Nauru, etc, get substantial gains with tax avoidance through measures like this.
I'm wondering how viable this is for trading. I imagine you coud setup an LLC or INC offshore, open bank accounts, transfer assets and keep them in USD, and then trade.
Would you be able to use US based brokers and still avoid taxes?
I have no idea how this would work, or it would even be beneficial for trading, but I imagine it would be. Any insight would be appreciated. Thanks.