Forex Trading is an activity which lends itself well to Offshore Corporate Structuring. For details on how you can minimize 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 summarize how it would work is:
- You set up a zero tax International Business Company
- 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 at home though, if you know a smart Tax Accountant 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)
- The majority of trading profits could be reinvested Offshore potentially tax free.
AND because a high percentage of our client base are professional forex traders we know and can introduce you to a wide range of quality Brokers (including Brokers who will accept as customers Offshore Companies set up by US persons.
AND as I myself trade forex via an Offshore Company I can explain to you how it works, from a practical perspective, on a day to day basis.
How To Get Around The American Problem
If you’re a US based forex trader you’ll know that the trading terms on offer from US brokers are NOT trader friendly. The only way to get better trading terms is to shop for a Broker outside of the US. BUT the quandary there is most (certainly all quality) non US Forex Brokers will not accept Americans (or American Companies) as customers.
The solution is to:
(a) set up an Offshore Company with a(n ideally nil tax jurisdiction resident) Nominee Director (which is a service that OCI can provide); &
(b) set up a Private Foundation to own (ie hold all the issue shares in) the Offshore Company
The Private Foundations is basically Europe’s version of a Trust save for one big difference ie a Foundation (unlike a Trust) is a separate legal entity ie it can sue and be sued. Moreover a Foundation is presumed under European Common law to be both the legal AND beneficial owner of whatever asset it holds/buys. (One jurisdiction ie the Seychelles has taken this a step further ie they specially codified this aspect of the law by inserting into their Foundations Act, see below).
Whenever you apply to open a Corporate Brokerage Account one of the first questions the Broker asks is “Who is the beneficial owner of this Company??”
If the Company applying for the Brokerage account is owned by a Seychelles Private Foundation we can say to the Broker. “This Company is owned by a Seychelles Foundation. By operation of law – that is section 71 of the Seychelles Foundations Act – the Foundation is deemed to be both the legal AND beneficial owner of the Company“.
Globally speaking having a Foundation as part of your Corporate structure can also deliver potential tax planning opportunities. In short the beneficiaries of a Foundation are not entitled to receive a distribution from a Foundation unless or until such time as the Foundation Council actually resolves to pay a distribution. This means (provided the Company/Foundation is seen to be managed and controlled from Offshore) that you can potentially retain profits inside your Company and only be liable to pay tax on income paid to you by the Company or Foundation.
Local laws can have an impact. Hence you should seek local legal/financial/tax advice before committing to set up an Offshore Company or Private Foundation.
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