I’m often asked “Can I use an Offshore Company to own/operate a Consulting Business?”
I’m guessing in most cases what the inquirer would really like to know is how to do it tax effectively from Offshore.
Essentially how it works is:
- A nil tax offshore company (commonly an International Business Company “IBC”) is incorporated
- The IBC owns/operates the consulting business
- An Offshore account is set up in a nil tax banking centre
- Customers/clients contract with and pay the IBC. The IBC Invoices the clients from offshore. Payment for invoices rendered will be banked free of tax in the first instance
- You or your local company would be sub-contracted by the IBC to actually perform the services
- You would invoice the IBC periodically (eg monthly) for this work which income would be assessable income in your home country – though a smart Tax Accountant should be able to assist you to claim a series of expense against this income (eg home office, equipment, travel, phone/internet/utilities etc) to significantly reduce the amount of tax payable on this income.
- The rest of the income earned by the IBC can held (and potentially invested) offshore tax free.
Note local law can have unique impact on your situation. Hence we always advise that you seek local legal/tax advice before embarking on such a venture.