Using an Offshore Company for Tax Optimization of a Legitimate Business

Many people still think that offshore companies are just tools to use when one wants to hide his/her money in a tax haven. There is this of course and I will not deny it. But there is far more to it than just this. Offshore companies can be used by business men who are operating legitimate businesses and who want to optimize their taxes.We were contacted recently by a client that is in a business activity which involves the payment of royalties.

Our client problem was that he was about to sign an agreement that would generate a lot of royalties for his company. But the problem was that the country in which his company was registered and the country from which the royalties would be paid did not have a double tax treaty therefore 30% of taxes would be withhold on any royalties payments made to his company which was not satisfying for him. 

Double Tax Treaty Hunting

We went double tax treaty hunting on his behalf. We needed to find a jurisdiction that has a favorable tax treaty with the country from where the royalties would be paid for, that has a reasonable corporate income tax rate and that does not withhold taxes on payment of dividends or other payments made to a foreign company.

We did find such a jurisdiction and we found for him a country that has a double tax treaty with the country from where the royalties would be paid which treaty provides a withholding tax rate on royalties of 0% instead of 30%. In addition the corporate income tax rate on profits in this country is only 10% and providing that the company has expenses (invoices from the client company) it is possible to manage the company in such way that it will generate few profits. In addition this country does not withhold taxes on foreign outbond payments.

Tax Optimization 

The point I’m trying to make is that there are many solutions available for tax optimization (which is different from tax evasion) for many legitimate businesses and that offshore companies are not only for those that want to hide their fortune from the taxman but also for those that want to optimize their businesses tax liability

Therefore if you are a businessman knows that there may be solutions for you to pay fewer taxes on your business operations.

Do not hesitate to contact us if you need more information on this matter.