A Travel Agent Business lends itself well to an “Offshore” Corporate Structuring plan.
Most Travel Agents work on the Commission Agent model, ie you act as a middleman between the Travel Service Provider (ag an Airline or Hotel) and the end user customer.
Typically in this model of a Travel Agency you in effect act as a sales agent of the Travel Service Provider, ie you are authorized to market/sell the Travel Service Provider’s products/services and you get paid a commission (ie typically a percentage of the sale/deal proceeds) when the consumer orders/pays for the service.
To summarise how it would work is:
- You set up a zero tax Offshore Company eg an International Business Company (“IBC”) with a nil tax jurisdiction based “Nominee” Director
- You are appointed as the IBC’s Authorised Representative
- On behalf of the IBC you negotiate terms with the Travel Service Provider to pay your IBC a Commission if/when the Buyer and Seller do business
- The Commission Agent/Broker agreement/contract is signed Offshore by the Nominee Director
- The source of the income is the contract
- Because the contract was signed offshore in a nil tax environment there should be no tax payable on income generated by the contract (a) where the Company is incorporated and (b) where you live (assuming you structure and administer the Company in the right way).
- 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 wherever you are tax resident though 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). More sizeable amounts could be accessed by way of loan or a 2nd Offshore Company could be formed to buy your onshore investments
- If you don’t want the authorities to know how much money you are earning eg by way of wages you could convert your hard currency into Bitcoin and/ or you could use an anonymous ATM or Debit/VISA card to withdraw $ from an Auto Tele Machine (though technically that receipt would be assessable income for local tax purposes)
The majority of trading profits would be banked and or reinvested Offshore potentially tax free.
Online Based Travel Agency
The other model of Travel Agency Business that lends itself well to an “Offshore” Corporate Structuring Plan, is where your business operates 100% online (ie products are advertised online and orders are placed for and paid for online).
Here’s how such a business can work from an “Offshore” Perspective:
- A nil tax offshore company (commonly an International Business Company “IBC”) is incorporated
- The IBC owns/operates a/the web based business (eg ownership of the web-domain and the website/artworks or trademark/s or any sole distributor rights are held by or transferred to the IBC)
- An Offshore account (which received payments via a merchant account) is set up in a nil tax banking centre
- Ideally the server is located in a country which does not tax business on the basis of server location (eg Singapore or Iceland)
- Customers contract with and pay the IBC. All such monies are banked free of tax in the first instance
- You pay the actual Service Provider – the difference between what the customer pays you and what you pay the service provider is your profit (banked/held Offshore in a tax free bank account)
- You or your local company would be contracted by the IBC to manage sales/delivery of product/website maintenance/whatever
- 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 expense against this income (eg home office, equipment, travel, phone/internet/utilities etc) to significantly reduce the amount of tax payable on this income.
- Often there is some kind of intellectual property (“IP”) created or behind the website based 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 would 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
- Ideally once you start to grow you and to add substance you would be wise to set up your MD/Board and or a sales team onshore to take orders and receive income in a low tax onshore environment (eh 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 including a Nominee Director etc as part of the Corporate structure. See this page for details of how that can work:
In either model of business, in most cases, it’s likely – notwithstanding that you may have an “Offshore” Management system in place (ie a nil tax jurisdiction based Nominee Director) – that, if you’re seen to be a/the beneficial owner of the Company, your IBC would be liable at law to declare income and pay tax where you live.
If you want to mitigate (to the greatest extent possible) against this risk you’d be wise to also set up a Private Foundation to be/act as the shareholder of your Company (in short because a Private Foundation is presumed at law to be both the legal AND beneficial owner of any asset it holds/owns). For more information check this link: https://offshoreincorporate.com/private-interest-foundations/
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