A lot of companies are looking for any new tax benefits that will help them keep more of their revenue and assets. This has led to a lot of offshore banking and other activities that are intended to help companies protect their assets. Of course, when you start moving money offshore, it automatically carries a certain stigma of “tax evasion” with it. However, there is a definite distinction between tax evasion and tax planning – one is extraordinarily illegal, the other is just a good idea.
An offshore IBC (International Business Corporation) allows companies to incorporate in a country where they don’t have to pay any local taxes (as long as the revenue was generated somewhere else). In fact, the way an IBC is set up in most countries, the company is not actually allowed to conducted business there and can only generate revenue internationally. There will usually be some kind of annual franchise tax for corporation renewal, but it is usually only around $300 dollars. Everything else will be free from taxation in that country.
Along with the tax benefits, there are some other advantages to starting an offshore IBC. Depending on the country where the company incorporates, there will be some different rules and regulations that will help companies get the most out of their banking. For example: if you incorporate in a country like Panama, you won’t have to deal with currency restrictions or to go all the way to the country to incorporate the company. There is no requirement to file reports on offshore activities and shareholder identities are strictly private.
Companies that are involved with international markets can benefit a great deal from incorporating in one of these countries. Asset protection is extremely important in the modern business world, and if you speak with tax professionals you can find out if this is the right option for your company.
Tax Benefits Vs Tax Evasion
No matter where you set up your international business, it will be hard to get past that stigma of tax evasion. So how do you know if your move offshore is really legal or not?
I’m not going to pretend to have all the answers on this one, because there are a lot of mitigating factors that can change from place to place. The most important thing you can do is speak to a tax professional who knows all the local tax laws as well as the laws in the country of incorporation. In basic terms, though, if you are hiding your money in any way (which can include simply not reporting it), you are probably doing something wrong. If, on the other hand, you are incorporating offshore because that is the easiest way to handle your international trade, you’re probably okay.
Tiffany Miller is a financial writer from Salt Lake City, UT. Her specialties include tax law and personal finance. She works closely with lawyers in Panama who help Americans create an offshore IBC.