Have you accumulated valuable knowledge in terms of how regular businesses can benefit from the deployment of Artificial Intelligence (“AI”)?
Are you considering selling that knowledge on a Consultancy or Contract basis?
If so, you’ll be pleased to hear that such a line of work/business lends itself well to an “Offshore” Corporate Structuring Plan.
Conceptually there are two ways you could go about this from an “Offshore” perspective:
(a) You set up a nil tax Offshore Company. The client/customer signs a services agreement and pays the Offshore Company which then subtracts performance of the on-the-ground work to you or local company (See below for details); or
(b) You/your local Company characterises your business service system as being IP (Intellectual Property) based. The ownership of this IP is transferred to a nil tax Offshore Company. The customer signs an agreement with your local Company but every time the onshore Company invoices a client it pays a Royalty or License Fee to the tax-free Offshore Company (which payment is of course receipted tax free).
Most Consultants usually prefer to adopt Option A.
Like most people I’m guessing what you’d really like to know is how to run an AI Consulting Business tax effectively from Offshore. Essentially how it works is:
- A nil tax Offshore Company (commonly an International Business Company “IBC”) is incorporated
- An Offshore account is set up for/in the name of the IBC in a nil tax banking centre
- Customers/clients (ie your Employer if you’re a Contractor) contract with and pays the IBC. The IBC is seen to invoice its clients from Offshore. Payment for invoices rendered are banked free of tax in the first instance.
- In the case of an online based business (ie where orders are received/fulfilled and or work is done Online) typically tax liability lies only in the country from which the Company is seen to be managed and controlled. Ideally your IBC would be seen to be managed & controlled from Offshore ie from a nil tax jurisdiction.
- To ensure that your IBC is seen to be managed and controlled from Offshore the Company would be structured with a (nil tax jurisdiction based) Nominee Director/Shareholder; Ideally (and especially if you live in a country which has CFC laws) the owner/beneficial owner of the Company would also be seen to be based Offshore (which may be achieved by deploying a Private Foundation to act as shareholder of your IBC)
- The IBC would invoice the Client/Employer for the work that you do (this could be at an agreed hourly rate or daily rate or on a per job basis)
- The source of the income is the contract. Each work contract ideally would be signed Offshore by the Nominee Director. Hence, at law, the argument goes that all/any profits earned would have been generated (and banked) Offshore ie in a nil tax environment
- You or your local company would be sub-contracted by the IBC to actually perform the services for the IBC
- 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 (given your tax status as a Contractor) should be able to assist you to claim/setoff a significant quantity of tax deductible expense against this income (eg home office costs, equipment costs, travel costs, educational costs,, out of home meal expenses, phone/internet/utilities etc) to significantly reduce the amount of tax that would otherwise be payable on this income. (assessable income less allowable deductions = taxable income)
- The rest of the income earned by the IBC would be banked (and potentially invested) offshore tax free. There are also strategies that could be deployed that may enable you to redirect substantial portions of these funds onshore tax free as capital (eg for investment purposes)
If you’re working under Contract for just 1 or 2 clients you could also potentially characterize your AI Consulting business as a Recruitment Agency. Check the following Link which explains how that might work: https://offshoreincorporate.com/common-offshore-corporate-strategies/#9
Would you like to know more? Then please Contact Us:
info@offshorecompaniesinternational.com
DISCLAIMER: OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers or legal advisers. You are advised to seek local legal/tax/financial advice in regards to your local reporting/tax requirements before committing to set up or use an Offshore Company or other entity
