The past few years have seen a steady advance in the popularity of Business/Life Coaching Services.
With most schools and many Universities failing to properly provide students with the personal and financial skills needed to survive or succeed in the “real world”, a clever substrata of Entrepreneurs has begun to arise filling the gap in this ever widening market.
Whether you are a life skills coach, business coach or in the business of providing financial education, in the tech/virtual era many if not most such businesses can be based “Online”.
Any business where customers are sourced and services (and/or products) are delivered online can typically benefit from incorporating Offshore ie iin a nil business/corporate tax environment.
In principle here’s how it can work:
- A nil tax offshore company (commonly an International Business Company “IBC”) is incorporated
- The IBC owns/operates the web based business (eg ownership of the web-domain and the website/artworks or trademark/s or any products/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
- The Company is (seen to be) managed and controlled from a nil tax jurisdiction (which will entail the deployment of a nil tax jurisdiction based “Nominee” director). You are employed as a Sales/Coaching Consultant or in some Consulting Capacity
- Ideally the server would be located in a country which does not tax businesses on the basis of server location (eg Singapore)
- Customers contract with and pay the IBC. When the customer places an order the terms and condition are drafted in such a way as to make the “situs” of the contract (ie the place where the contract was formed) a/the nil tax jurisdiction.
- You communicate with the client online and deliver all products/services via email or via the web.
- All such monies are banked free of tax in the first instance.
- 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 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
- Ideally once you start to grow your business, 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 (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 including a Nominee Director etc as part of the Corporate structure. See this page for details of how that can work:
(and if you live in a country which has a Controlled foreign Corporation law you’ll also want/need to include a Foundation as part of the Corporate structure).
Local laws can have an impact. Hence you’d be wise to seek local legal/tax/financial advice before you commit to incorporate such a business “Offshore”.
Would you like to know more? Then please Contact Us: