What is a Tax Information Exchange Agreement?

A Tax Information Exchange Agreement (TIEA) provides for the exchange of information on request relating to a specific criminal or civil tax investigation.

 

Let’s assume that you set up a Tax Free Offshore Company in a country which has a TIEA with your home/taxing country.

 

How it works in practice is, if your home state becomes suspicious of your connection to or involvement with an Offshore Company (ie if they think an Offshore Company is being used by you to avoid domestic tax obligations), the Tax Authorities of your home country can request of the Tax Haven country Government, as of right, (ie if there is a TIEA entered into between the 2 countries) that they give up the name and address of the “underlying beneficial owner” of the company in question.

 

Although the information isn’t publicly filed this information must/will be kept by the Tax Free Offshore Company’s local Registered Agent who is obliged by law (as a condition of its International Corporate Service Provider’s License) to hand over this information upon request by/to the local Financial Services Authority (who then pass ownership details to the Tax Haven’s Attorney General’s Office who then pass it down the line to the requesting country).

 

The moral to the story? If you are looking to incorporate Offshore – and you’d prefer to keep ownership of your Tax Free Offshore Company as private possible – as a starting point you’ll want to exclude from your jurisdiction shopping list any country which has a TIEA with your home state.

 

 

Paypal To Accept Bitcoins

EBay’s PayPal service will start accepting bitcoins, opening the world’s second-biggest internet payment network to virtual currency transactions.

 

“We’re announcing PayPal’s first foray into bitcoin,” Bill Ready, the chief of eBay’s Braintree unit, said at Techcrunch’s Disrupt SF conference on Monday.

 

“Over the coming months we’ll allow our merchants to accept bitcoin. On the consumer side it will be a sleek experience.”

 

As the world’s biggest online marketplace and operator of the global payments service, eBay is the most significant business to embrace bitcoin to date. The move could potentially enable PayPal’s 152 million registered accounts to transact using the virtual currency, spurring wider use and acceptance, according to Gil Luria, an analyst at US-based Wedbush Securities.

 

“PayPal integrating bitcoin into Braintree is a very substantial development,” Luria said. “Not only will it make it possible for some of the fastest-growing apps to integrate bitcoin seamlessly, it opens the door for PayPal to integrate bitcoin into its main wallet functionality. If that happens millions of retailers will de facto be accepting bitcoin overnight.”

 

Braintree provides payment capabilities on websites and in mobile apps such as mobile car-booking service Uber and Airbnb, the short-term home rental service for travellers.

 

EBay acquired Braintree for $US800 million in cash last year to expand its mobile-transactions business. PayPal and Braintree will work with bitcoin payment-service provider Coinbase to enable payments in the virtual currency, Ready said.

 

Goods, services

 

Ready said that tens of thousands of PayPal merchants using Braintree will be able to accept bitcoins if they choose to do so.

 

“We’re at the right time for this, and to see how to propel it forward,” Ready said. He expects to announce which merchants will accept bitcoin in the coming months.

 

EBay would join other companies in accepting bitcoin, a digital currency that started to enter the mainstream in 2013. Dell began accepting bitcoins for for good such as computers in July.

 

Dish Networks, Overstock.com and Expedia also accept the virtual currency. Numerous online and offline businesses worldwide now accept bitcoins be it for beer, coffee or facials.

 

In total, about 63,000 businesses handle bitcoins, and users have set up more than 5 million digital wallets to keep their holdings at the end of June, according to CoinDesk, a website tracking the digital money’s use.

 

Bitcoins emerged from a 2008 paper written by a programmer or group of programmers under the name Satoshi Nakamoto, becoming the most popular virtual currency. It relies on a public ledger and cryptography to record transactions and protect ownership.

 

Uncertain future

 

A Bloomberg Global Poll of financial professionals in July indicated that there’s still skepticism of the virtual currency even as technology entrepreneurs, venture capitalists and hedge funds plow money and effort into building it into a global payment system.

 

Bitcoin prices have swung between more than $US900 to as low as $US341 this year as enthusiasts try to address the digital currency’s weaknesses, persuade consumers to embrace it and overcome governments’ concerns that it could be misused by criminals.

 

Fifty-five per cent of those surveyed said the virtual currency trades at unsustainable, bubble-like prices, according to the quarterly poll of 562 investors, analysts and traders who are Bloomberg subscribers. Another 14 per cent said it’s on the verge of a bubble.

 

How To Form a Multi-Layered Offshore Corporate Structure

Generally speaking a Controlled Foreign Corporation Law is one which requires you to declare at home any income earned by an Offshore Company where you hold or have the ability to hold the shares of that Company (eg an IBC where you have deployed a Nominee Director and Nominee Shareholder).

 

These days given that many countries have CFC Laws more and more clients are choosing to establish a dual structure ie a Tax Free Offshore Company and Tax Free Offshore Private Foundation (or a Tax Free Offshore Company and a Tax Free Offshore Trust) as such structures can potentially get you around CFC rules.

 

In the above scenario/s the shares of the Company are held by the Foundation or Trust as applicable.

 

I’m often asked by clients who live in countries with Controlled Foreign Corporation Laws. Can I set up a Company now and add a Trust or Foundation later?

 

Ideally the Foundation should be registered first as it is the “parent” entity (and the child should not be older than the parent!).  You could just incorporate a Company first and then add a Foundation later but there are two problems with that idea:

  1. Without the Foundation ie until such as time as the IBC Is owned by the Foundation you would be liable to declare at home any income earned by the IBC. Failure to so declare would be an act of tax evasion which is a criminal offence punishable by imprisonment.
  2. If you want the transfer of ownership of the IBC to the Foundation (or Trust) to be beyond legal challenge you would need to have the company valued and the Foundation (or Trust) would need to be seen to be paying fair market value for the shares it receives. And a sale and purchase agreement (contract) would need to be drawn up which would be need to be seen to be on commercially realistic terms.

 

 

How To Use an Offshore Company to Trade Forex and or Commodities

Forex and Commodity Trading are activities which lend themselves well to Offshore Corporate Structuring. For details on how you can minimise tax on trading profits using an Offshore Company as your trading vehicle please take a look at this page from our website: http://offshoreincorporate.com/trading-forex-using-an-offshore-company/

 

To summarise how it would work is:

  • You set up a zero tax International Business Company (“IBC”)
  • The IBC opens an account with the Broker
  • You are appointed as the IBC’s authorised trader (ie you place the buy and sell orders on behalf of the company)
  • For all intents and purposes the IBCs trading profits are generated in a nil tax environment tax free/offshore (ie provided the IBC Is structured properly)
  • When you need some living/spending money the IBC pays you a wage, or consulting fees or a commission (eg a percentage of trading profits generated)
  • That living/spending money can be paid to your local bank account (which means it would be assessable income wherever you are ordinarily resident for tax purposes though you should also be able to claim a sizeable amount of allowable deductions eg for home office, car, equipment, insurances, travel, stationary etc etc to reduce the amount of your “taxable” income at home)
  • If you don’t want the authorities to easily see how much money you are earning by way of wages you could use an anonymous ATM or Debit/VISA card to withdraw your wages from an Auto Tele Machine
  • The majority of trading profits could be reinvested Offshore potentially tax free.