hope this helps explain a little better. You right though when you say one will need to trade through an IBC and pay themself a salary.
Everyone loves a real homeowner's tax loophole.
Under US tax law (i.e., Section §911 of the Internal Revenue Code) , an American taxpayer and his wife can exclude up to $76,000 each from their salary ($152,000 = total), provided they live offshore at least 330 days of every year. This is called the "Foreign Earned Income Exclusion", and is part of the Statutory Internal Revenue Code. This exclusion is an annual tax allowance under US tax law, but you have to live outside the US at least 330 days to qualify for it.
The amount one can exclude increases to $80,000 for fiscal year 2,002. For 2001 the amount excludable is $78,000.
Here's what my IRS 2,000 (1040) Booklet says on page 15 (Chapter 4): Source of Earned Income: "The source of the earned income is the place where you perform the services for which you receive the income. Foreign earned income is income you receive for performing "personal services in a foreign country. Where or how you are paid has no effect on the source of the income.
For example, income you receive for work done in France is income from foreign source even if the income is paid directly to your bank account in the United States and your employer is located in New York City." - verbatim - IRS.
For Example: Anguilla Real Estate broker company X received $1,000,000 in annual commissions in 2,002. John and Joan Dakota (now living in Nassau, Bahamas or Georgetown, Cayman Islands) are the owners of Anguilla Real Estate broker company X - a company that has no offices inside the US.
John and Joan of Nassau could receive up to $160,000 in salary from the offshore IBC, as employees, and they would only have to file a IRS Form 2555 with their 1040 tax return.
This "exclusion" is called the Foreign Earned Income Exclusion - and can be taken annually; but if you don't file Form 2555 with your 1040, you don't get the EXCLUSION!
Anguilla Real Estate broker company X would owe no taxes on its $1,000,000 revenues, so long as it does not "do business inside the US". Anguilla has no income tax system. Furthermore, countries like Anguilla, Cayman and the Bahamas do not tax capital gains, dividends, royalties or interest. There is no estate tax duty in these places either, and no gift taxes.
Furthermore, with a little tax planning, the corporate income accruing to the Anguilla company from "services performed outside the US" would not ordinarily be "Foreign Personal Holding Company Income" in the hands of the shareholders. Using a foreign trust to hold the shares of the foreign company from the very beginning can often help avoid some of the other pitfalls in the US Tax Code â i.e., that might apply to John and Joan Dakota (as shareholders of Anguilla company X).
Incidentally, US taxpayers John and Joan Dakota (above) would owe taxes on their capital gains and interest income, as these incomes are not considered "Foreign Earned Income" under Code/Section §911. That's the only real downside to this "loophole".
This might also be in interest to any one.
. On December 6, 2001, the governments of the United States and Antigua and Barbuda signed an agreement for the exchange of information with respect to taxes. Specifically, the object and scope of the agreement targets each country's assistance to assure the accurate assessment and collection of taxes, to prevent fiscal fraud and evasion, and to develop improved information sources for tax matters. At hand for the signing were Treasury Secretary Paul O'Neill and Antiguan Prime Minister and Minister of Finance Lester Bird. In a Treasury News press release announcing the signing, Treasury Secretary Paul O'Neill made the following remarks at the signing:
Everyone loves a real homeowner's tax loophole.
Under US tax law (i.e., Section §911 of the Internal Revenue Code) , an American taxpayer and his wife can exclude up to $76,000 each from their salary ($152,000 = total), provided they live offshore at least 330 days of every year. This is called the "Foreign Earned Income Exclusion", and is part of the Statutory Internal Revenue Code. This exclusion is an annual tax allowance under US tax law, but you have to live outside the US at least 330 days to qualify for it.
The amount one can exclude increases to $80,000 for fiscal year 2,002. For 2001 the amount excludable is $78,000.
Here's what my IRS 2,000 (1040) Booklet says on page 15 (Chapter 4): Source of Earned Income: "The source of the earned income is the place where you perform the services for which you receive the income. Foreign earned income is income you receive for performing "personal services in a foreign country. Where or how you are paid has no effect on the source of the income.
For example, income you receive for work done in France is income from foreign source even if the income is paid directly to your bank account in the United States and your employer is located in New York City." - verbatim - IRS.
For Example: Anguilla Real Estate broker company X received $1,000,000 in annual commissions in 2,002. John and Joan Dakota (now living in Nassau, Bahamas or Georgetown, Cayman Islands) are the owners of Anguilla Real Estate broker company X - a company that has no offices inside the US.
John and Joan of Nassau could receive up to $160,000 in salary from the offshore IBC, as employees, and they would only have to file a IRS Form 2555 with their 1040 tax return.
This "exclusion" is called the Foreign Earned Income Exclusion - and can be taken annually; but if you don't file Form 2555 with your 1040, you don't get the EXCLUSION!
Anguilla Real Estate broker company X would owe no taxes on its $1,000,000 revenues, so long as it does not "do business inside the US". Anguilla has no income tax system. Furthermore, countries like Anguilla, Cayman and the Bahamas do not tax capital gains, dividends, royalties or interest. There is no estate tax duty in these places either, and no gift taxes.
Furthermore, with a little tax planning, the corporate income accruing to the Anguilla company from "services performed outside the US" would not ordinarily be "Foreign Personal Holding Company Income" in the hands of the shareholders. Using a foreign trust to hold the shares of the foreign company from the very beginning can often help avoid some of the other pitfalls in the US Tax Code â i.e., that might apply to John and Joan Dakota (as shareholders of Anguilla company X).
Incidentally, US taxpayers John and Joan Dakota (above) would owe taxes on their capital gains and interest income, as these incomes are not considered "Foreign Earned Income" under Code/Section §911. That's the only real downside to this "loophole".
This might also be in interest to any one.
. On December 6, 2001, the governments of the United States and Antigua and Barbuda signed an agreement for the exchange of information with respect to taxes. Specifically, the object and scope of the agreement targets each country's assistance to assure the accurate assessment and collection of taxes, to prevent fiscal fraud and evasion, and to develop improved information sources for tax matters. At hand for the signing were Treasury Secretary Paul O'Neill and Antiguan Prime Minister and Minister of Finance Lester Bird. In a Treasury News press release announcing the signing, Treasury Secretary Paul O'Neill made the following remarks at the signing:
