June | 2019 | Offshore Companies International

How To Make (Potentially Tax Free) Money from a Trading Bot Using an Offshore Company

If you’re in the business of designing and or deploying Trading Bots you’ll be pleased to know that such a field of endeavour lends itself well to an “Offshore” Corporate Structuring Plan.

Here’s how it typically works:

You set up a tax free Offshore Company (“OC”)
The tax free Company would own or have the License to commercially exploit the Bot
The OC would enter into a contract with each client/investor whereby the OC agrees to allow the investor/client to trade using the Bot or to otherwise utilize the Bot
The contract would provide for a payment/remuneration scheme whereby the tax free Offshore Company would be paid by the client/investor for supplying the Bot
The payment could either be a one off fee or a periodic fee or a percentage of profits generated by the Bot
The OC would be seen to be managed and controlled from Offshore (and ideally would seen to be beneficially owned by an entity offshore) ie from a tax free jurisdiction
The source of the fees would be the contract
The contract would be signed/closed Offshore by the Company ie in a nil tax environment

As such you can create a scenario whereby the income is generated, prima facie, in a nil tax environment.

Provided the Company is (a) seen to be managed and controlled from Offshore and (b) seen to be owned/beneficially owned by an Offshore/non-local resident there should be no tax payable in your home country on the Company’s earnings.

In short you should be able to achieve (a) by deploying a nil tax jurisdiction resident “Nominee” director & achieve (b) by setting up a Private Foundation to own/hold the shares of the Company.

A Bot is in effect a Piece of Intellectual Property (“IP”). Most clients in such a position would deploy a twin Company structure whereby the IP is held by one Company and the commercial rights are held under license by a 2^nd Company (but more on that another 60 seconds..).

Local laws can have an impact. Hence you should seek local legal/tax/financial advice prior to setting up an Offshore Company for such purposes.

Would you like to know more? Then please Contact Us:

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

HOW TO SET UP A TRADING ALGORITHM OR TRADING SIGNALS SUPPLY BUSINESS OFFSHORE

A Tax Free Offshore Company can be used to supply trading Signals and or Trading Algorithms in the Forex etc Trading world. In principle here’s how it can work:

A nil tax offshore company (commonly a tax free Offshore/International Business Company “IBC”) is incorporated
The IBC owns the Trading Software or System which identifies marketable/saleable Trading signals
A/The investor/client enters in to a contract with the IBC where the IBC agrees to supply the Trading Signals or Trading Algorithm as the case may be in return for the Investor/Client paying the IBC a lump sum or periodic payments (these payments could also be a percentage of profits generated by the client from using your algorithm/the Trading Signals you supply)
All services are provided/delivered via the web or via email
The IBC is seen to be managed and controlled from – and is seen to be delivering services from – a nil tax jurisdiction
Any commercial agreements entered into (and/or terms and conditions agreed to) should clearly state that services are being delivered from x country (ie the Offshore/IBC jurisdiction) and that the contract is formed/closed in that jurisdiction
An Offshore account (which can also receive payments via a merchant account) is set up in a nil tax banking centre
Ideally the server is located in a country which does not tax business on the basis of server location (eg Singapore)
Customers contract with and pay the IBC. All such monies are banked free of tax in the first instance
You or your local company would be contracted by the IBC to manage sales/delivery of product/website maintenance/whatever
You would invoice the IBC periodically (eg monthly) for this service which income would be assessable income in your home state – though a smart Tax Accountant should be able to assist you to claim a series of expenses against this income (eg home office, equipment, travel, phone/internet/utilities etc) to significantly reduce the amount of tax payable on this income
Often there is some kind of intellectual property (“IP”) created as part of or underpinning such a business (even if it’s just the website/design). It may be advantageous to you down the track if ownership of the business and the IP were held by 2 different entities. What you can do there is set up a 2^nd IBC to own the IP. The first IBC (ie the Trading Company) pays license fees periodically to the 2^nd IBC which fees wold be receipted tax free. This could be advantageous if you wanted to bring ownership of the web-business onshore or if you wanted to sell the business but keep a passive (potentially tax free) income stream
Ideally once you start to grow, and to add substance, you would be wise to set up your MD/Board and or a sales team to take orders and receive income in a low tax onshore environment (eg Hong Kong, Ireland, Singapore, Cyprus etc as per the Amazon/Google model).

To minimise the chances of the IBC being taxed onshore ideally the IBC should be (and be seen to be) managed and controlled from offshore. How this can be achieved is by including a (nil tax jurisdiction based) Nominee Director etc as part of the Corporate structure. For details of how that can work click on these links:

http://offshoreincorporate.com/faq/should-i-engage-nominees-or-should-i-direct-and-hold-the-shares-in-my-offshore-company/

http://offshoreincorporate.com/faq/how-can-i-protect-my-underlying-ownership-of-my-offshore-company-where-a-nominee-is-engaged-to-act-as-director-or-shareholder/

(And if you don’t want to have to declare in your local annual tax return that you are the “Beneficial Owner” of an Offshore Company – which could/would have tax consequences onshore – you’d be wise to set up a Private Foundation to hold the shares of your IBC)

Would you like to know more? Then please Contact Us:

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

How To Run a Trade Finance Business Using a Tax Free Offshore Company

A Trade Finance Business lends itself well to an Offshore Corporate Structuring Plan. Here’s it can/would work:

You form a tax free Offshore Company
The client would sign off on a contract with your tax free Offshore Company for the Company to supply Trade Finance Services on certain terms
The agreement would provide for the Company to be paid a fee for provision of these services
The source of the fees would be the contract
The contract would be signed/closed Offshore by the Company ie in a nil tax environment
The Trade Finance itself ideally would also come from Offshore (ie from an Offshore Bank established in a nil tax environment)

As such you can create a scenario whereby the income is generated, prima facie, in a nil tax environment.

In short you should be able to achieve (a) by deploying a nil tax jurisdiction resident “Nominee” director as part of the Corporate structure & achieve (b) by setting up a Private Foundation to own/hold the shares of the Company.

Local laws can have an impact. Hence you should seek local legal/financial/tax advice before committing to set up an Offshore Company for such purposes.

Would you like to know more? Then please Contact Us:

www.offshoreincorporate.com

info@offshorecompaniesinternational.com