How To Use An IBC To Own/Operate A Translation Business

Particularly given all such services can be provided online Translation Service Businesses lend themselves well to “Offshore Corporate Structuring.


Here is how such a business could work from an Offshore Perspective:


  1. You would set up a nil tax Offshore Company
  2. The nil tax company would sign contracts to supply Translation Services and/or receive orders/service requests via email/online
  3. The Company would be set up in such a way so that’s it’s seen to be (a) managed/controlled from, and (b) supplying services from, Offshore
  4. The Company would appoint you as an authorised representative of the Company (ie empowering you to negotiate such contracts and to bid for such contracts on behalf of the Company).
  5. Once the contract has been signed the Company would subcontract the work to you
  6. You would be paid a profit share (eg a third of the work you invoice – which is a common practice in professional firms) or a minimal hourly rate.


As part of your brief you might also be given signing power on a bank account reporting/answerable to the Director. However that relationship is structured for legal reasons, it would need to be seen to be commercially realistic. The income you generate from this would be paid to you (or your local company which, I imagine, would then pay a dividend to you) which would be assessable income at home for you.

The remainder of the profit could be held (and/or reinvested) offshore potentially tax free. (See below How to Bring Offshore Money Onshore for more details).


How To Bring Offshore Money Onshore


There are 5 ways to bring home money from a tax-free IBC:


  1. Set yourself up as an arms’ length consultant and have the IBC pay you consulting fees periodically. This means you should only have to pay tax on what you bring into your home country (and even that tax you should be able to minimise as a lot of what otherwise-might-be personal expenses could be written off as business costs, eg home office, utilities, car, phone, electrical/office equipment, stationery, computers travel etc etc etc). The rest of the IBC’s income could be held offshore and be (re)invested offshore potentially tax free. Say your target capital base is 3 million Euro and every year you leave at least half the IBC’s income offshore. Because you’re not paying tax yearly on all the IBCs income instead of taking 20 years to accumulate 3 million Euro, with the power of compounding, you could accumulate 3 million within 5 to 7 years. This is what the smarter clients do ie they pay a little bit of tax at home each year on their overseas earnings but most of their income is kept offshore and reinvested offshore;
  2. Bring back the money as a loan. Yes this can be done but great attention to detail will be required particularly with respect to lending parties, loan terms and documentation;
  3. Use an anonymous debit card and withdraw cash from automated teller machines. This can still work in some places though it should be noted that some of the bigger countries now have the ability to trace and connect one to such withdrawals;
  4. Have your IBC form and fund a subsidiary ie 2nd tax free Offshore Company and then have that 2nd Offshore Company buy any substantial assets you’d like to have onshore (eg cars, real estate, shares, general investments etc). Yes in theory you could have your IBC buy these things but, given most likely there will be a Consultancy Agreement in place between you and the IBC (and payments going from the IBC to you which will be visible to your local tax authorities) the smarter thing to do would be to have a 2nd (seemingly unrelated) IBC buy these items for you;
  5. Another option is to take the long hold view. What this entails is letting your capital base build over a period of years; Then, when you get to the stage where you are ready to close down your Offshore business, (or you are ready to retire) you can do one of two things, either:


(a)   Expatriate your home country and become “non-resident for tax purposes”, shift to a country which has no income tax and/or CGT (eg Panama, Seychelles, Monaco, etc etc etc) and draw down the capital from your offshore entity (and bank the money tax free); or


(b)   Expatriate your home country, become “non-resident for tax purposes”, and become a PT ie a Perpetual Traveller. How this can work is you spend say 4-5 months a years in one country, 4-5 months a year in another country and the rest of your time travelling. This way, assuming you are not seen to have substantial ties with any one country, you should not be considered as tax resident in any one country. Then you simply draw down the capital from your offshore entity (and bank the money tax free).


Note: provided you have successfully become a non-resident for tax purposes of your home country, there’s nothing stopping you from changing your mind a year or 2 later about the expat life and returning to your home country with a bunch of tax free dollars in your back pocket.


Note also unless you (have expatriated or) live in a country that does not have CFC laws (and/or unless or are structured in a tax effective/compliant manner) you may still be required to declare and pay tax at home on your IBC’s earnings.


Local laws can have an impact. Hence it would be wise to seek local tax/legal/financial advice before committing to embark on such an endeavour.



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