A Tax Free Offshore Company can be used to supply trading Signals and or Trading Algorithms in the Forex etc Trading world. In principle here’s how it can work:


  1. A nil tax offshore company (commonly a tax free Offshore/International Business Company “IBC”) is incorporated
  2. The IBC owns the Trading Software or System which identifies marketable/saleable Trading signals
  3. A/The investor/client enters in to a contract with the IBC where the IBC agrees to supply the Trading Signals or Trading Algorithm as the case may be in return for the Investor/Client paying the IBC a lump sum or periodic payments (these payments could also be a percentage of profits generated by the client from using your algorithm/the Trading Signals you supply)
  4. All services are provided/delivered via the web or via email
  5. The IBC is seen to be managed and controlled from – and is seen to be delivering services from – a nil tax jurisdiction
  6. Any commercial agreements entered into (and/or terms and conditions agreed to) should clearly state that services are being delivered from x country (ie the Offshore/IBC jurisdiction) and that the contract is formed/closed in that jurisdiction
  7. An Offshore account (which can also receive payments via a merchant account) is set up in a nil tax banking centre
  8. Ideally the server is located in a country which does not tax business on the basis of server location (eg Singapore)
  9. Customers contract with and pay the IBC. All such monies are banked free of tax in the first instance
  10. You or your local company would be contracted by the IBC to manage sales/delivery of product/website maintenance/whatever
  11. 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
  12. Often there is some kind of intellectual property (“IP”) created as part of or underpinning such a  business (even if it’s just the website/design). It may be advantageous to you down the track if ownership of the business and the IP were held by 2 different entities. What you can do there is set up a 2nd IBC to own the IP. The first IBC (ie the Trading Company) pays license fees periodically to the 2nd IBC which fees wold be receipted tax free. This could be advantageous if you wanted to bring ownership of the web-business onshore or if you wanted to sell the business but keep a passive (potentially tax free) income stream
  13. Ideally once you start to grow, 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).


To minimise the chances of the IBC being taxed onshore ideally the IBC should be (and be seen to be) managed and controlled from offshore. How this can be achieved is by including a (nil tax jurisdiction based) Nominee Director etc as part of the Corporate structure. For details of how that can work click on these links:


(And if you don’t want to have to declare in your local annual tax return that you are the “Beneficial Owner” of an Offshore Company – which could/would have tax consequences onshore – you’d be wise to set up a Private Foundation to hold the shares of your IBC)


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