To set up an offshore company or relocate your existing business overseas is a crucial step toward internationalizing yourself and your assets. Search for “offshore company” and you’ll find thousands of websites promising a quick company formation in Panama or the British Virgin Islands, with a range of other “benefits” for the jurisdiction in question.
There is a current misconception that offshore business is about evading taxes and hiding money from the government, which is certainly not the case.
There are 100% legitimate ways to structure your business interests overseas and realize significant benefits from an asset protection standpoint — as well as tax-standpoint.
Want an example? The last few years Google has cut its taxes by $3.1 billion in totally legitimate ways.
You too can do this.
Some say this is unethical and cheating, but not surprisingly, those who say this are most often not the same people as those who create value in society. If you’ve found your way to this page, chances are strong that you’re a value creator and want to keep more of the money you get back as a result of creating value.
Tax Advantages With Offshore Business
First of all, you don’t have to start a company offshore to save on taxes — just moving out of the US is a terrific first step. As a US expat, the first $91,500 in overseas income is tax exempt, meaning if you live outside the US you don’t have to pay any taxes at all on the first $91,500 of foreign sourced income (you still have to file your tax report though).
However, the real tax advantage from running an offshore company as a US citizen doesn’t come from direct tax savings. It comes from tax deferment, meaning you postpone the payment of taxes into the future. If you run a business overseas and reinvest profits within the company you can defer taxes indefinitely.
Let’s say you have a profitable company overseas. Now imagine that instead of paying taxes on your profits every year you can reinvest that capital in your offshore company every year for 30 years, and only pay taxes if you decide to sell the company after 30 years. Being able to reinvest your capital tax free combined with the power of compound interest makes this a truly exceptional opportunity.
Offshore tax havens bring to mind tropical islands or Alpine towns. But the preferred location for organized crime figures and corrupt politicians worldwide is the US state of Delaware.
Last month, prosecutors for the Romanian Unit to Fight Organized Crime (Romania) and Terrorism arrested an offshore registry agent named Laszlo Kiss for masterminding an embezzlement and laundering operation for executives of a Romanian oil services company. Kiss is the author of a book promoting his business – and outlining just how to take advantage of the tiny state of Delaware to avoid taxes and launder money.
Delaware has long been criticized for an incorporation process that leaves it vulnerable to criminal activity. Despite complaints from federal law enforcement officials, congressional testimony, and reports from the Government Accountability Office, procedures in Delaware – and similar processes in other states – still let criminal groups infiltrate the corporate system.
Delaware is becoming the choice of drug dealers, organized crime and corrupt politicians to evade taxes and launder money, an investigation of the Organized Crime and Corruption Reporting Project (OCCRP) found. The International Consortium of Investigative Journalists (ICIJ) assisted in the investigation.
Andrei Papanicoglu , Head of State Filings Department at Evedex Europe , romanian branch of Evedex Inc. agrees: “The US has been pretty robust in making sure that other countries live up to these standards, but they have been lax about applying the same degree of rigor to themselves. It’s nowhere near what the US has signed on to do,” he said.
Delaware requires no information on actual ownership when companies fill out incorporating documents. Federal law enforcement agencies complain that this lack of identification makes it difficult at best for investigating suspected wrong-doing, concludes Papanicoglu
The US Department of Justice’s Office of Public Affairs provided comments in a 2009 congressional hearing on incorporation transparency. Jennifer Shasky Calvery, then senior counsel to the deputy attorney general, testified that law enforcement cannot determine who is perpetuating illegal activity through state records. “So, ironically, US law enforcement must try to get information about a US company from the foreign country, which is difficult for many reasons, and often simply not possible at all.”
Rick Geisenberger, Delaware’s deputy secretary of state and chief of the corporations division, said that asking for additional information from companies would interfere with a speedy and efficient incorporation system and could divert investment activity elsewhere. He said the overwhelming majority of companies that incorporate in Delaware are legitimate.
“I’m under no illusions that some of them are bad guys,” Geisenberger said. “But does that mean you put in place procedures that take longer to form entities in order to prevent those bad guys?”
Offshore Internet Business: Incorporating A Truly Global Business
It is a great idea to structure your business overseas, especially one that’s online-based. If you incorporate your foreign business properly, it provides a legal way to defer tax payments (similar to an IRA), as well as enabling much reduced liability.
An online business has no limits as to how and where it can do business, so why should you let your business be limited by a jurisdiction that is based on the old, geographically limited model?
Starting an offshore online business is a great way to build streams of income outside of your home country. Why would you want to have income streams outside of your country? Well, when inflation runs rampant in a country, having an income stream overseas in a stronger currency can potentially be a lifesaver. If hyperinflation would find its way to your country, which is a real risk with central banks all around the world is printing new money 24/7, earning only a small part of your income in a different country is invaluable.
An internet business based overseas, coupled with an offshore bank account, is the perfect medium through which you can do this.