Which Offshore Jurisdiction?

[ScalperJoe]

Which gives you an exemption for $100,800 (2015) and potentially some housing costs. Worldwide income above that is still taxed even if you never step foot in the U.S.

I think form 2555 applies if you're actually working overseas (as in employment). If you have a trading account at TD Ameritrade, for example, and rent an apartment overseas where you place all of your trades, you would not qualify for that exemption. Otherwise, traders would simply take their laptops and operate from a beach in Tahiti, while paying zero tax on the first $100k of trading gains.

From the instructions on Form 2555:

"Foreign earned income for this purpose
means wages, salaries, professional fees,
and other compensation received for
personal services you performed in a
foreign country during the period for which
you meet the tax home test and either the
bona fide residence test or the physical
presence test."

https://www.irs.gov/pub/irs-pdf/i2555.pdf

 

[ScalperJoe]

Americans have no place to hide as their world income is taxed in the US apparently.

Yes, and with FATCA and FBAR filings, the IRS is required to know of ANY bank or ANY asset you hold in your name worth over $10,000. Even if the foreign country doesn't tax the interest, the U.S. will.

These are the list of countries that have agreed with the U.S. regarding FATCA:

https://www.treasury.gov/resource-center/tax-policy/treaties/Pages/FATCA.aspx

Here is the link for information regarding FBAR and the "$10,000 rule" by IRS:

https://www.irs.gov/businesses/smal...t-of-foreign-bank-and-financial-accounts-fbar

What I found interesting is reading a few threads where a resident in HK was told his TD Ameritrade account would be closed abruptly because he didn't have a social security number on file (well of course he didn't, he's a HK resident). Another trader posted a letter from Scottrade which said his Canadian trading account would be closed abruptly due to "banking regulations."

Fidelity recently changed the way it does its cash sweeps, whereby all cash is now stored in a "government reserve" account, rather than the standard money market account.

You're right, "Americans have no place to hide"...when the s*#t hits the fan!

 

[Sig]

I think form 2555 applies if you're actually working overseas (as in employment). If you have a trading account at TD Ameritrade, for example, and rent an apartment overseas where you place all of your trades, you would not qualify for that exemption. Otherwise, traders would simply take their laptops and operate from a beach in Tahiti, while paying zero tax on the first $100k of trading gains.

From the instructions on Form 2555:

"Foreign earned income for this purpose
means wages, salaries, professional fees,
and other compensation received for
personal services you performed in a
foreign country during the period for which
you meet the tax home test and either the
bona fide residence test or the physical
presence test."

https://www.irs.gov/pub/irs-pdf/i2555.pdf

I'm guessing you're right, which is too bad because that Tahiti idea would be pretty appealing!

 

[DallasCowboysFan]

Americans have no place to hide as their world income is taxed in the US apparently.



So setting up constructions in these countries is useless as they are considered as illegal. On top of that many European countries consider the country where the REAL management takes place as the taxating country and not the fiscal paradise where the company is domiciliated.


Unless you are a big multinational corporation in the U.S. like Apple, Google or Facebook.

I knew they were registered overseas, but I did not know about the Double Irish Arrangement.

http://visualeconomics.creditloan.c...how-google-apple-facebook-avoid-paying-taxes/


The double Irish arrangement was a tax strategy that some multinational corporations used to lower their corporate tax liability. The strategy has ceased to be available since 1 January 2015, though those already engaging in the arrangement have until 2020 to find another arrangement.


https://en.wikipedia.org/wiki/Double_Irish_arrangement

Why do so many celebrities live in Monaco? It is a horrible place to live. Why don't they take an offshore construction? Because they know better then anybody here what the risks are.

Unless you are a big multinational corporation in the U.S. like Apple, Google or Facebook.

I knew they were registered overseas, but I did not know about the Double Irish Arrangement.

http://visualeconomics.creditloan.c...how-google-apple-facebook-avoid-paying-taxes/




The double Irish arrangement was a tax strategy that some multinational corporations used to lower their corporate tax liability. The strategy has ceased to be available since 1 January 2015, though those already engaging in the arrangement have until 2020 to find another arrangement.


https://en.wikipedia.org/wiki/Double_Irish_arrangement


Does Monaco offer tax free living ?

 

[dealmaker]

Unless you are a big multinational corporation in the U.S. like Apple, Google or Facebook.

I knew they were registered overseas, but I did not know about the Double Irish Arrangement.

http://visualeconomics.creditloan.c...how-google-apple-facebook-avoid-paying-taxes/




The double Irish arrangement was a tax strategy that some multinational corporations used to lower their corporate tax liability. The strategy has ceased to be available since 1 January 2015, though those already engaging in the arrangement have until 2020 to find another arrangement.


https://en.wikipedia.org/wiki/Double_Irish_arrangement


Does Monaco offer tax free living ?

Irish arrangement has been in the news since the Credit Crisis.....

"There's only one exception: French nationals who are resident ofMonacodo have to pay personalincome taxwhich is computed according to the principles of Frenchtaxlaw. The amount payable is paid directly to the French government. The Principality ofMonacodoesn't levy capital gainstaxnor wealthtax."

 

[luisHK]

The full list was in 2015: Andorra, Liechtenstein, Guernsey, Monaco, Mauritius, Liberia, Seychelles, Brunei, Hong Kong, Maldives, Cook Islands, Nauru, Niue, Marshall Islands, Vanuatu, Anguilla, Antigua and Barbuda, Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Cayman Islands, Grenada, Montserrat, Panama, St Vincent and the Grenadines, St Kitts and Nevis, Turks and Caicos, US Virgin Islands.

So setting up constructions in these countries is useless as they are considered as illegal. On top of that many European countries consider the country where the REAL management takes place as the taxating country and not the fiscal paradise where the company is domiciliated.
Why do so many celebrities live in Monaco? It is a horrible place to live. Why don't they take an offshore construction? Because they know better then anybody here what the risks are.

Uh ? Where did you see that HK is blacklisted in the EU ? InvestHK in Belgium could at least give you a basic understanding of the situation and refer you to qualified agents/lawyers.

Belgium and Luxembourg where the first I think in Europe years back to strike a tax treaty with HK, which allowed moderately complex corporate set up to be established to minimise taxes on European markets. A bit bit too complex for small operations though, and possibly more difficult to set up now than 10 years ago. Also this set up seemingly never made the mainstream news, not sure it ever became popular or wether it was succesfully challenged by european authorities.
Since than several other european countries have signed a tax treaty with HK.
HK over the last decade has increased its transparency and collaboration with foreign authorities, since a couple of years there must be at least 1 natural person as director of HK company.
HK is not a great place if you want to hide yourself from european authorities, but it's definetely not blacklisted. It's actually a huge trading center and myriads of european companies trade goods (as well as services) with HK companies - lots of mainland chinese exporters invoice and ship via a HK company.

 

[luisHK]

BTW HK is known as the main center for capital flight from Mainland China, as someone who has had business dealings there for the last 10 years plus I've noticed the place getting more and more difficult but it is not only related to issues with US and European authorities, there seems to be a LOT of pressure from mainland authorities, and according to friends across the border, for them things have been deteriorating bankingwise since the handover in 1997.

 

[i am nobody]

Uh ? Where did you see that HK is blacklisted in the EU ?

https://www.hg.org/article.asp?id=35925

Read the first lines.

Hong Kong government said that the EC decision to blacklist them as a tax haven as totally unfounded and groundless. Hong Kong government also stressed that they have signed agreements with three EU member states to avoid double taxation so far, two of which have come into force, and thus it is unfair to Hong Kong that the EC did not take these agreements into account when making the list.

http://www.insurancetimes.co.uk/eu-releases-tax-havens-blacklist/1414391.article

You can find this information on dozens of websites. Even from the European Parliament. But I am too lazy to dig them up.
I read somewhere that every country outside of Europe that will tax less than 10% will be on the blacklist.

 

[luisHK]

Thanks, indeed, i had completely missed that event last year.

After reading your link and a quick look on the net it is not clear if and what are the consequences for HK, it is not on the tax haven black list from OECD and ten EU members only voted to blacklist HK, which seems the required amount to be included in the list. Also I haven't heard any issue from european friends buying goods from HK companies nor from friends selling from Hk to european companies ( a couple of those who have a significant market in Europe from HK I know very well ) , though the few business owners involved i'm still in contact with don't deal much if at all in the ten member states who voted to include HK in the blacklist.

From your link :

"The ten EU member states which blacklisted Hong Kong as tax haven are Bulgaria, Croatia, Estonia, Greece, Italy, Latvia, Lithuania, Poland, Portugal and Spain

OECD as well as some of the big EU member states which have signed CDTA with Hong Kong including Belgium, France, Ireland, Netherlands and the UK also recognised the contribution of Hong Kong in these respect. To date, Hong Kong has already signed thirty two CDTAs and seven Tax Information Exchange Agreements (“TIEA”) "


Beeing mentionned in the list doesn't look good for HK, but using HK corporations still seem legal, although as mentionned in the below link invoices/expenses coming through them might be challenged, which happened before already (I remember a letter sent to a HK company I was involved with abt 8 years ago from an italian customer requesting documentation to justify a proper activity in HK to cover themselves with Italian authorities. it was unusual for us but I also heard of several people over the years who faced challenges from european authorities over their HK links, some of those challenges didn't turn too well). I know others who didn't face the smallest challenge regarding HK during a tax audit btw.


"For international investors / multinational companies using Hong Kong as an investment holding / financing / licensing location, they should review and assess their current structures/arrangements and be prepared to demonstrate that the Hong Kong company is set up with commercially justifiable reasons, there is sufficient substance in the Hong Kong company, and adequate supporting documentation is in place to substantiate the proper transfer pricing policies for the related party transactions conducted by the Hong Kong company."

http://www.pwchk.com/home/eng/hktax_news_jun2015_7.html

 

[MoneyWalks]

In Europe a number of countries are defined as fiscal paradises, which means that companies set up in these countries are considered as fiscal fraude and their income will be taxed in the respective country where the shareholder lives..

I would really appreciate if you can point me where did you find this, in what legislation is this stipulated? If it's fraudulent than why all these companies that work on establishing offshore entities are offering to their clients this options?

................
So setting up constructions in these countries is useless as they are considered as illegal. On top of that many European countries consider the country where the REAL management takes place as the taxating country and not the fiscal paradise where the company is domiciliated.

I'm a little bit confused about this issue as it doesn't make any sense for me because an offshore firm, as far as my understanding goes and as its name suggest it's not allowed to do business in the country where it's domiciled so obviously the management most likely will take place in the home country of the offshore firm owner. So this is basically nullifying the sole purpose of the offshore entity if you're taxed in the country where the real management is done.

I have no experience in this field but for quite some time I've tried to educate myself on this topic and more recently I begin to do it more seriously as I'm looking myself to open an offshore entity for my needs. From a legal stand point of view I want to make sure that I comply with the law, that’s my number one priority.

It seems that it's more complicated than I thought.

all the best!