June | 2020 | Offshore Companies International

How To Set up a Subscription Based Startup Business Tax Free Offshore

Are you looking to startup a Subscription based business?

(For the uninitiated) Subscription Based businesses began in the media world many years ago. Before the Information age people would subscribe to a particular magazine or news service or book club ie the subscriber would pay a regular fee (eg a monthly fee or yearly fee) to regularly receive a particular newspaper or magazine. (Eg when I was a boy my parents subscribed to a record club and received a certain number of new vinyl LP records every month).

With the technological revolution, and in particular the advent of SaaS (Software as a service) products, a LOT of businesses are shifting away from the traditional cash flow model (ie where revenue is derived from a customer’s one-off purchase) to a subscription based revenue model where revenue flows in on a recurring basis. In this later scenario subscribers pay subscription fees periodically in return for consistent access to the delivery of a particular good or service.

Examples of latter-day subscription based models include:

Music streaming services (eg Spotify)
Pay TV services (eg Netflix)
Fitness Clubs (ie Gyms)
Online Newspapers (eg News Limited)
Software Services (eg MYOB/Accounting Software Providers)

With such a business often, if not typically, the services are offered Online (ie via a website and/or an active online direct marketing campaign), the subscriber signs up online and the service is delivered online (ie via download or via email) or via post/courier.

Such a business lends itself perfectly well to an “Offshore” Corporate Structuring Plan.

Here’s how such a business can/will typically work from an “Offshore” Perspective:

A nil tax offshore company (commonly an International Business Company “IBC”) is incorporated to own/operate the business
You design/launch a website or Online Product/Sale portal which is owned by the Offshore Company
The IBC owns all proprietary items (including also the/any Trademarks, Operating software/systems, soft products to be delivered to customers etc)
Your website/landing page should ideally should be hosted in a nil tax/private Jurisdiction (Iceland is currently the most popular destination for such web hosting, Singapore is also often favoured)
The clients find you and/or contact you via the web
The IBC is seen to be managed and controlled from (and ideally beneficially owned from, see below) Offshore. This is achieved via the appointment of a (nil tax jurisdiction based) “Nominee” Director.
The client applies to become a subscriber Online (eg via your website)
Your standard sale agreement/website terms and conditions should provide that a contract is not formed until the customer’s offer is accepted by you (ie the Offshore Company)
Before the client clicks the “subscriber” button he/she clicks on a button acknowledging that he/she has read and agrees to be bound by your terms & conditions
Acceptance of the buyer’s offer would be provided by the Company (which is seen to be managed from “Offshore” via a nil-tax-jurisdiction resident Nominee Director) sending an email or text to the buyer, after he/she has paid online; In simple terms what this means is that the situs of the Contract ie the place where the contract of sale (ie the agreement between you and the buyer for you to supply goods in consideration of the buyer paying), at law, is formed is the director’s location ie a nil tax environment…
Hence the income – from which, in effect, the contract of sale is the source – has been/is derived, prima facie, in a zero tax jurisdiction (every time a client buys and you send an email thanking him for payment that concludes as contract of sale at law)
Ideally the Company’s Board of directors would meet once a month to ratify (ie belatedly approve) all subscription contracts signed up/entered into in the month previous
An Offshore account (which can/will also be set up to receive card payments via a merchant account) is opened in a nil tax banking centre (ie a jurisdiction/country which does not tax interest paid by local banks on bank deposits)
Subscribers pay the IBC; All such monies are banked free of tax in the first instance
You or your local company would/could be contracted by the IBC to manage sales/delivery of product/website maintenance/whatever
(If you need a regular income) 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
Ideally once you start to grow you 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).

Management/Ownership Structure

As alluded to, in order to minimise the chances of the IBC being taxed onshore, ideally, the IBC should/would be (and be seen to be) managed and controlled from Offshore. How this can be achieved is by including a Nominee Director 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/

Ideally – so you can swear on oath in the event of a tax investigation, law suit or regulatory inquiry – I am not the beneficial owner of this Company, (which could get you around what might otherwise be a substantial tax or legal liability eg imprisonment for tax evasion) you will want to set up a Private Foundation to act as the shareholder of your IBC. (This should also assist you to get around CFC rules ie if you live in a country which has such a law).

With a bespoke legal/admin structure in place you should only be liable to declare and pay tax on income paid to you by your Offshore Company (and/or on any distributions paid to you by the Foundation); The rest of your Online sales earnings you should be able to bank, and/or invest, Offshore in a nil tax environment.

Similarly, if a product that you sell doesn’t perform and a customer tries to sue you the good news is your personal assets should not be at risk as the customer has contracted with a limited liability Company (ie the Company carries the legal risk, not you personally). Moreover, having your business incorporated Offshore in a foreign/strange land is of itself a deterrent. (Have you ever tried to sue/get money out of an “Offshore” Company? It’s the Litigation Lawyer’s equivalent of climbing Mount Everest!)

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

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

How To Import or Market PPE Using a Tax Free Offshore Company

The COVID 19 pandemic has seen a massive market develop for the supply of Personal Protective equipment (eg Facemasks, surgical masks, surgical gloves, surgical gowns, hand sanitizer etc).

If you are buying these goods from one country (eg China) and selling them into a 2^nd country (eg the USA or Europe or South America) but living in a 3^rd country you’ll be pleased to know that such a business lends itself well to an “Offshore” Corporate structuring Plan.

Here’s how it will work:

A nil tax offshore company (commonly an International Business Company ie “IBC”) is incorporated in a country that does not tax income earned/sourced outside of the home country (let’s say the Company is called “IBC Trading Limited”)
IBC sets up an Offshore bank account, in a nil tax banking centre, which receives customer payments (including ultimately those made via a merchant account)
Ideally the website and server are hosted/located in a country which does not tax business on the basis of server location (eg Singapore)
Customers contract with and pay the IBC. The contract is formed Offshore, ie in a nil tax jurisdiction (see below re how that is achieved). All sales monies are banked free of tax in the first instance
IBC pays the manufacturer for the goods. The manufacturer ships (or couriers or posts or airmails) the product or goods direct to IBC’s customer
The IBC is seen to be managed and controlled from (and ideally beneficially owned from, see below) Offshore. This is achieved via the appointment of a (nil tax jurisdiction based) “Nominee” director.
Your standard sale agreement/website terms and conditions should provide (a) that a contract is not formed until the customer’s offer is accepted by you (ie the Offshore Company) and (b) that the source of the income is the contract. (If the order come in via website, before the client clicks buy he/she clicks on a button acknowledging that he/she has read and agrees to be bound by your terms & conditions)
Acceptance of the buyer’s offer would be provided by the Company (which is seen to be managed from “Offshore” via a nil-tax-jurisdiction resident Nominee Director) sending an email or text to the buyer, after he/she has placed the order; In simple terms what that means is that the situs of the Contract ie the place where the contract of sale (ie the agreement between your Company and the Buyer for your Company to supply goods in consideration of the buyer paying), at law, is formed is the director’s location ie a nil tax environment…
Hence the income – from which the contract of sale is the source – has been/is derived, prima facie, in a zero tax jurisdiction (every time a client buys and you send an email thanking him for payment that concludes a contract of sale at law)
(For belt and braces) ideally the Company Board of Directors should meet once a month and ratify all contracts entered into in the previous month
(If you need a regular income) 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. Alternatively the Company could loan you money (a loan is not taxable) or buy your investments direct (which would avoid the Company having to pay you “income” which would have tax consequences)
Ideally once you start to grow you 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).

The other possibility is you could simply act as a Commission Agent for the Manufacturer of the PPE. Such an operation also lends itself well to an Offshore Corporate Structuring Plan. See below which explains how.

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/

How To Use an IBC To Act as a Commission Agent or Broker

Acting as a Commission Agent or Deal Broker is a line of business which lends itself well to an Offshore Corporate Structuring Plan.

In this model structure (ie as set out below) it’s assumed that you will be acting as a middleman between a buyer and seller and if the buyer and seller do business you get paid a commission ie typically a percentage of the sale/deal proceeds.

To summarise how it would work is:

You set up a zero tax Offshore Company eg an International Business Company (“IBC”) with a tax haven based Nominee Director
You are appointed as the IBC’s Authorised Representative
On behalf of the IBC you negotiate terms with the Seller and or Buyer to pay your IBC a Commission if/when the Buyer and Seller do business
The Commission Agent/Broker agreement/contract is signed Offshore by the Nominee Director
The source of the income is the contract.
Because the contract was signed offshore in a nil tax environment there should be no tax payable on income generated by the contract (a) where the Company is incorporated and (b) where you live (assuming you structure and administer the Company in the right way).
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 tax resident 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). More sizeable amounts could be accessed by way of loan or a 2nd Offshore Company could be formed to buy your onshore investments
If you don’t want the authorities to know how much money you are earning eg by way of wages you could convert your hard currency into Bitcoin and/ or you could use an anonymous ATM or Debit/VISA card to withdraw $ from an Auto Tele Machine (though technically that receipt would be assessable income for local tax purposes)

The majority of trading profits would be banked and or reinvested Offshore potentially tax free.

In either structuring scenario, ideally – so you can swear on oath in the event of a tax investigation, law suit or regulatory inquiry – I am not the beneficial owner of this Company, (which could get you around what might otherwise be a substantial tax or legal liability eg imprisonment for tax evasion) you will want to set up a Private Foundation to act as the shareholder of your IBC. (This should also assist you to get around CFC rules ie if you live in a country which has such regs).

With a bespoke legal/admin structure in place you should only be liable to declare and pay tax on income paid to you by the company (and/or on any distributions paid to you by the Foundation); The rest of your Online/sales earnings you should be able to bank, and or invest, Offshore in a nil tax environment.

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

How To Set up an Education Products Business Tax Free Offshore

With the slow decline in the popularity of (&, post Covid, the practical challenges of using) traditional classroom based educational institutions, ever increasing amounts of students are looking for Online learning/educational opportunities.

As a result a new substrata of entrepreneurs has begun to emerge, ie persons & businesses offering direct education products/courses (eg Literacy programs, numeracy programs, financial educational products, online learning tools etc).

With such a business typically the services are offered Online (ie via a website and/or an active online direct marketing campaign) and delivered online (ie via download or via email) or via post/courier.

A business where goods or services are advertised for sale, and/or delivered, online lends itself (rather) well to an “Offshore” Corporate Structuring Plan.

Here’s how such a business will typically work from an “Offshore” Perspective:

A nil tax offshore company (commonly an International Business Company “IBC”) is incorporated to own/operate the business
You design/launch a website or Online Product/Sale portal which is owned by the Offshore Company
The IBC owns all proprietary items (including also the/any Trademarks, Operating software/systems, soft products to be delivered to customers etc)
Your website/landing page should ideally should be hosted in a nil tax/private Jurisdiction (Iceland is currently the most popular destination for such web hosting, Singapore is also often favoured)
The clients find you and/or contact you via the web
The IBC is seen to be managed and controlled from (and ideally beneficially owned from, see below) Offshore. This is achieved via the appointment of a (nil tax jurisdiction based) “Nominee” director.
Your standard sale agreement/website terms and conditions should provide (a) that a contract is not formed until the customer’s offer is accepted by you (ie the Offshore Company) and (b) that the source of the income is the contract. Before the client clicks buy he/she clicks on a button acknowledging that he/she has read and agrees to be bound by your terms & conditions
Acceptance of the buyer’s offer would be provided by the Company (which is seen to be managed from “Offshore” via a nil-tax-jurisdiction resident Nominee Director) sending an email or text to the buyer, after he/she has paid online; In simple terms what that means is that the situs of the Contract ie the place where the contract of sale (ie the agreement between you and the buyer for you to supply goods in consideration of the buyer paying), at law, is formed is the director’s location ie a nil tax environment…
Hence the income – from which the contract of sale is the source – has been/is derived, prima facie, in a zero tax jurisdiction (every time a client buys and you send an email thanking him for payment that concludes as contract of sale at law)
An Offshore account (which can/will also be set up to receive card payments via a merchant account) is opened in a nil tax banking centre
Customers/clients contract with and pay the IBC; All such monies are banked free of tax in the first instance
You or your local company would/could be contracted by the IBC to manage sales/delivery of product/website maintenance/whatever
(If you need a regular income) 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
Ideally once you start to grow you 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).

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/

With a bespoke legal/admin structure in place you should only be liable to declare and pay tax on income paid to you by the company (and/or on any distributions paid to you by the Foundation); The rest of your Online sales earnings you should be able to bank, and or invest, Offshore in a nil tax environment.

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

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

HOW TO SET UP A STARTUP ADVISOR SERVICES BUSINESS OFFSHORE

With the recent realigning of the world economy a proliferation of new start up businesses have begun to emerge.

This realignment presents business opportunities for entrepreneurs in the start up advisory service sector.

These types of business are generally subscription based with the adviser providing (hopefully useful!) information to the would be start-up business owner on a regular (commonly monthly) basis eg information/advice in regard to:

How to get set up Online
How to market your services
Accounting systems
What kind of legal structure to adopt
Business pitfalls to be aware of
Market trends
Ongoing Financial mentoring/management
Etc

Typically the customer is sourced/found, and all services are delivered, online.

A business where goods or services are advertised for sale, and delivered, online lends itself (incredibly) well to an “Offshore” Corporate Structuring Plan. Here’s how it usually works:

A nil tax offshore company (commonly an International Business Company “IBC”) is incorporated to own/operate the business
You design/launch a website or Online Product/Sale portal which is owned by the Offshore Company
The IBC owns all proprietary items (including also the/any Trademarks, Operating software/systems, soft products to be delivered to customers etc)
Your website/landing page should ideally should be hosted in a nil tax/private Jurisdiction (Iceland is currently the most popular destination for such web hosting, Singapore is also often favoured)
The clients find you and/or contact you via the web
The IBC is seen to be managed and controlled from (and ideally beneficially owned from, see below) Offshore. This is achieved via the appointment of a (nil tax jurisdiction based) “Nominee” director.
Your standard sale agreement/website terms and conditions should provide (a) that a contract is not formed until the customer’s offer is accepted by you (ie the Offshore Company) and (b) that the source of the income is the contract. Before the client clicks buy he/she clicks on a button acknowledging that he/she has read and agrees to be bound by your terms & conditions
Acceptance of the buyer’s offer would be provided by the Company (which is seen to be managed from “Offshore” via a nil-tax-jurisdiction resident Nominee Director) sending an email or text to the buyer, after he/she has paid online; In simple terms what that means is that the situs of the Contract ie the place where the contract of sale (ie the agreement between you and the buyer for you to supply goods in consideration of the buyer paying), at law, is formed is the director’s location ie a nil tax environment…
Hence the income – from which the contract of sale is the source – has been/is derived, prima facie, in a zero tax jurisdiction (every time a client buys and you send an email thanking him for payment that concludes as contract of sale at law)
An Offshore account (which can/will also be set up to receive card payments via a merchant account) is opened in a nil tax banking centre
Customers/clients contract with and pay the IBC; All such monies are banked free of tax in the first instance
You or your local company would/could be contracted by the IBC to manage sales/delivery of product/website maintenance/whatever
(If you need a regular income) 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
Ideally once you start to grow you 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).

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/

With a bespoke legal/admin structure in place you should only be liable to declare and pay tax on income paid to you by the company (and/or on any distributions paid to you by the Foundation); The rest of your Online sales earnings you should be able to bank, and or invest, Offshore in a nil tax environment.

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

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com