How To Run a Tax Effective Consulting Business From Offshore

If you’re providing Consulting Services (in particular to a non-local/International clientele) then you’ll be pleased to know that such a business lends itself well to an “Offshore” Corporate Structuring Plan.

Essentially how it works is:

A nil tax offshore company (commonly an International Business Company “IBC”) is incorporated with a nil tax jurisdiction resident “Nominee” Director
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.
Every contract should provide that (a) the bargain was concluded Offshore (ie in a /the nil tax environment) and (b) that services will be provided from Offshore
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.

Management/Ownership Structure

As hinted at above, if you want 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 Consulting Revenue 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