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Offshore company

TheKing

Member
Jun 13, 2005
498
11
18
Hey all

I run a family owned consulting biz (3 consultants and we are all family members) and we make a decent income. I have been looking at ways to rearrange the companys finances a little to meet two goals I have in the next few years

1.Reduce tax we pay each year
2.Retire in a caribbean island at some point.. Cayman would be good but open to other options as long as its hot in the winter LOL

So here is what I am planning to do. First of all YES I do realize this is frowned upon, I'm not doing my duty as a Canadian by paying my taxes, etcetera, etc

I obviously cant ask my accountant for help on this as I dont want a record of this conversation in case we ever get audited and he gets called up on the stand to testify against me. I do all my own accounting anyway and he just does year end taxes

First some stats:
company has been around for 3 yrs
we are a bunch of indep. consultants who banded together to go out and work on our own
we bring in about 400-500k a year between the 3 of us
we pay taxes on almost all of that amount... its reduced a bit because of entertainment expenses/phone/etcetera but obviously we barely make a dent in the 400-500k with those expenses
all billings need to be invoiced by our canadian company as it would be a bit frowned upon if our clients had to make cheques payable to "420 fund Cayman Islands Inc".
none of us take a salary from the company so we're not employees. We get a small dividend each year and save/invest the rest of the cash.

What I want to do:
Open up a corporation in a caribbean island. Alot of these islands don't make companies pay any tax as long as they are foriegn companies that do business outside the island -- which we do
Open a bank acct in the same island
Every month, receive an "invoice" from the caribbean company for consulting services. This would be explained that we outsource some of our consulting to a company in the caribbean. For example we maybe pay some guy in the caribbean to help us with our proposals or other work.
We would pay maybe $5k or $10k a month to this company.
Cheque gets mailed off to pay the invoice, gets deposited in caribbean bank, and becomes tax free. And all the while is a deductible expense for our Cdn corporation.
This money would never come back to canada or leave the island in anyway. We would save up so each of us could buy a condo there or something.

So here's my questions:
I think I have covered all of the angles and possible areas that could trip me up. I would use another address (not our company office address) to set up the caribbean corp and to have the bank acct statements sent to. We would not keep any of the caribbean corp papers onsite at our business or any of our homes. They would probably go in a safe deposit box in a bank. What *ELSE* have I overlooked?????!??

Will this work??? We will be explaining to our accountant that we need to pay some guy overseas some $$$ to help us out with our business. We make more money each year than we did before (by a bit.. not huge increases) so we could attribute that to the fact that we have outside help. We are also taking on more responsibility and clients each year so maybe we could say that we had our hands full and its cheaper to outsource.

if anyone has experience, forum links that would be useful, books to read, etc. it would be VERY VERY VERY helpful. As you can imagein there is not much info out there other than companies that want to charge you $5k to help you incorporate... and I'm sure its quite easy to do and I can do it on my own.
 

RamsesIII

New member
Feb 13, 2006
770
1
0
I recommend reading:

Take Your Money & Run
and
The Tax Haven Roadmap

In the old days many companies were 'shut down' by CRA that providedd these services "Sabourin & Sun' etc.

From what I remember Harris & Harris law firm used to provide consulting on these matters.

Make sure the financial institution you choose offers online access and the ability to access your funds via a Visa Debit Card which is tied to your account.

PM me for more details.
 

TheKing

Member
Jun 13, 2005
498
11
18
Rubmeister100,

Thanks for your feedback... one of the things I need is criticism on where things could go wrong, and you have been quite helpful. Definitely wont' take your comments personally as they are very useful!!!

You mentioned a few things that I thought I had under control --
Withholding tax - isn't that only for services physically performed in Canada? I would be procuring consulting services (ie. development of a report offshore based on the information I pass on to the offshore consultant). I would receive an email copy of their report for example. So I think we have avoided the 'physically performed in Canada' issue by doing so. If i am correct, there is then NO withholding tax or waiver required.
$100k assets outside Canada - The assets would be held in an offshore (secret) bank account owned by a corporation in that country. I would be shareholder of that corporation, but that would not be disclosed to the Cdn government. So why would I want to disclose the fact that I have $100k+ outside the country? Are people who move here and "retain" property in their name in their homeland making this declaration? Or are they just hanging onto the property for when they (or their children.....) decide to retire 'back home'??? I think it is the latter.

Again, thanks for making these points.. i need to make totally sure that i have it all covered.
 

fmahovalich

Active member
Aug 21, 2009
7,255
13
38
I would also be careful of the 'Fraud' aspect.

You may want to check with the local Fraud Department and ascertain information ...ie; if these types of arrangements are investigated for 'False Pretences'.

With the world being a smaller place now, and computer access is a breeze, you wanna make sure the coppers or CRA don't do a warrant on your computer and banking information. If they delve into your actions, would it be classed as a FRAUD, given that it truly did occur on a computer IN CANADA!In fact, Im surprised the CRA (I know they are short staffed) has not already made an example of a few people who bury money offshore by fraudulent means
 

Mencken

Well-known member
Oct 24, 2005
1,047
40
48
Rubmeister100,

Thanks for your feedback... one of the things I need is criticism on where things could go wrong, and you have been quite helpful. Definitely wont' take your comments personally as they are very useful!!!

You mentioned a few things that I thought I had under control --
Withholding tax - isn't that only for services physically performed in Canada? I would be procuring consulting services (ie. development of a report offshore based on the information I pass on to the offshore consultant). I would receive an email copy of their report for example. So I think we have avoided the 'physically performed in Canada' issue by doing so. If i am correct, there is then NO withholding tax or waiver required.
$100k assets outside Canada - The assets would be held in an offshore (secret) bank account owned by a corporation in that country. I would be shareholder of that corporation, but that would not be disclosed to the Cdn government. So why would I want to disclose the fact that I have $100k+ outside the country? Are people who move here and "retain" property in their name in their homeland making this declaration? Or are they just hanging onto the property for when they (or their children.....) decide to retire 'back home'??? I think it is the latter.

Again, thanks for making these points.. i need to make totally sure that i have it all covered.
Sounds like fraud to me.
 

andydude

New member
Sep 14, 2009
281
0
0
your actually not really making enough $$ to warrant an offshore account. the ongoing "maintenance" costs etc. dont really give you much of an advantage given the complexity of creating offshore accounts. just start expensing alot more stuff.
 

Nickelodeon

Well-known member
Apr 13, 2003
1,914
347
83
63
toronto
Plus it sounds like you're getting a tax break on your current structure, ie. you're not drawing a salary and paying income tax at a nominal rate of 50%, you're getting a dividend, which I think, is taxed at a better rate. Correct?
 

On Speed

New member
Oct 14, 2009
32
0
0
Hey King, Any luck?
I'm not an expert in this field, however, I have a few friends that fly airplanes in countries where taxation is not applied. In addition I have a brother that works for Revenue Canada. At one point in my career I was offered a flying job in the Middle East. I was also interested on the idea how one could avoid paying tax to the great Revenue Canada. I turned the job down for other reasons. Anyways after asking every question to my brother here's how the story goes. In a nut shell its becoming very hard to hide money. You are right about all these off shore accounts and not paying tax, however, RC has international agreements with pretty much all the islands. This allows them to investigate your records anytime anywhere? Why? Who cares. It is what it is. So what does it take not to pay tax to Canada? Read below.
- You must live (in my case in the middle east for 2 or 5 years) - that includes your wife and kids. If your kids are in school it wont work. EVERYONE must leave Canada.
- You must cut all ties with Canada (that means close all your bank accounts, pay off all debt, no mortgage, no outstanding loans, surrender your drivers licence, health card...ect ect...can you believe even your LIBRARY card too!!!. lol I laughed when I heard that. Oh by the way all this applies to your wife too. She also must cut all ties with Canada.....that means no debt, surrender licence, health card....ect ect.....
Think about it for a second when you come to Canada to visit family you cant even rent a car. You have no licence. If your child gets sick no health card. Since you dont pay tax in Canada no soup for you!
- Basically you cannot have any affiliatiion with Canadian Soil.
- Your passport - you get to keep that:)
There was a case where a Pilot claimed he lived in Seatle, however, RC proved him wrong. He was actually living in Vancouver. They cought ONE withdraw he made from an ATM machine. That was good enough to nail him. He was making 300k a year.
Anyways good luck with your future.
 

scrooge

New member
Jun 7, 2004
920
0
0
What have you overlooked?

Nothing except that if you get audited by the CRA it will all fall apart.

If you don't get audited you can do whatever you want.

Seriously though, as someone who knows about this stuff... you don't know what you are doing nor what you are talking about. And I don't mean that in a disrespectful way, I mean it in a helpful way for you to recognize that you only know enough to get yourself in BIG trouble.

Just one example of something you don't know is that your Canadian Corporation would have to pay a 15% witholding tax on those payments for services unless you apply for an exemption from the CRA. And that raises a red flag.

And that once your foreign holding exceed $100k that you have to declare them on your tax return.

And that if all you are going to do is hive off $100k a year to retire in the Cayman Islands (BORING FUCKING PLACE BTW!) you better be 16 years old right now because Cayman is a fucking expensive place to live.

There are ways to do business offshore legally but it is getting more and more complicated. You are not the first to think of this~

Check out a book called "My Blue Haven" and then find a Canadian lawyer who SPECIALIZES in this field. Or just find a good Canadian tax lawyer (not accountant!!!!) who knows and is current on a day to day basis with tax laws and he can help you accomplish what you want to accomplish.

Doing it on your won is fine until you get caught.
Rubmeister100,

Thanks for your feedback... one of the things I need is criticism on where things could go wrong, and you have been quite helpful. Definitely wont' take your comments personally as they are very useful!!!

You mentioned a few things that I thought I had under control --
Withholding tax - isn't that only for services physically performed in Canada? I would be procuring consulting services (ie. development of a report offshore based on the information I pass on to the offshore consultant). I would receive an email copy of their report for example. So I think we have avoided the 'physically performed in Canada' issue by doing so. If i am correct, there is then NO withholding tax or waiver required.
$100k assets outside Canada - The assets would be held in an offshore (secret) bank account owned by a corporation in that country. I would be shareholder of that corporation, but that would not be disclosed to the Cdn government. So why would I want to disclose the fact that I have $100k+ outside the country? Are people who move here and "retain" property in their name in their homeland making this declaration? Or are they just hanging onto the property for when they (or their children.....) decide to retire 'back home'??? I think it is the latter.

Again, thanks for making these points.. i need to make totally sure that i have it all covered.
Your plan is not going to work. There are deductibility, withholding tax (other than the 15% already discussed) and "FAPI" issues. Consult an international tax expert.
 

Mikehorn

Govt Designated Pervert
Plus it sounds like you're getting a tax break on your current structure, ie. you're not drawing a salary and paying income tax at a nominal rate of 50%, you're getting a dividend, which I think, is taxed at a better rate. Correct?
Actually with the small business deduction, the company should be paying 16.5%. Plus it sounds like you may be missing out on some expenses, most notably vehicle and home office expenses. Hopefully you're keeping the investments in a separate holding company, in order to avoid jeopardizing your small business deduction.
 
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