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Offshore corp and bank account

Fifi_ulla

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Jul 19, 2013
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There is so much conflicting information on the internet about offshore corps...especially after the Panama Papers leak.

I have been doing consulting work to US companies and am in the US travelling 90% of the year and was considering opening a Delaware corp and bank account to make contract processing easier. But there's no real corporate tax saving as compared to creating a corp in the Bahamas or Barbados and do corp to corp billng from there. My thought was i could do the corp to corp billing and then pay myself dividends from the offshore bank transferring the money to canada - i'd still pay income tax on my income but at least I would be lowering my corporate tax rate.

Now i'm reading that I still have to declare I have 100% investment in a Bahamas corp on submitting my tax return, and even though I pay myself a dividend, the fact that i am 'resident' in Canada means i would have to pay the full corporate tax rate for the Bahamas Corp as if it was a Canadian Corp. For this reason i also read Barbados now abolished IBC at 1% corporation tax and now all corps pay local corp tax rate.

I don't have any friends who do offshore corps and I don't have an offshore tax specialist accountant - my accountant doesn't have a clue. Thought I'd ask here if anyone has tips or someone they can refer me to.

I"m not looking at doing tax evasion...just thinking of legal ways to lower it, especially since my work is not in Canada
 

ExerciseGuy

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Jul 29, 2010
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If you’re spending 90% of your time down south, any possibility of arguing you’re a resident of the US under the treaty? They generally have lower rates than up here.
 

Fifi_ulla

Active member
Jul 19, 2013
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If you’re spending 90% of your time down south, any possibility of arguing you’re a resident of the US under the treaty? They generally have lower rates than up here.
Tax rate is higher in the US which is why i was looking at a country with a lower corporate tax rate. I don't know about residency as i don't have a permanent address overseas - I can't find any information online and my accountant doesn't know either. So far I haven't found a tax professional who can give me the information i need.
 

bluecolt

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Jun 18, 2011
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Tax rate is higher in the US which is why i was looking at a country with a lower corporate tax rate. I don't know about residency as i don't have a permanent address overseas - I can't find any information online and my accountant doesn't know either. So far I haven't found a tax professional who can give me the information i need.
I have a bit of experience in this area. Your friends are right. Even if you spend 90% of your time overseas, Trudeau's son and his cronies will tax the shit out of you, nonetheless, since you are still considered a resident of Canada and your foreign earnings must be included in the calculation of your Canadian income tax.

I have suggested to high income individuals to move overseas, mainly Bermuda, a tax haven, or Florida, which has no State income tax. Canada taxes on residence, only. Hence, if you make enough dough, it behooves you to emigrate.
 

billie69

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Feb 19, 2013
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I’d recommend that you look into the British Virgin Islands. In order to register a company there, you need to contact the BVI Financial Services Commission and they will provide a list of registered agents who are approved to set this up for you. There are also lawyers here in Canada who specialize in these matters. NB: I have not done this yet, but am still doing my research. Please let me know how it goes.
 

SchlongConery

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Jan 28, 2013
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Seek advice from a tax lawyer not an accountant. Generally speaking, tax lawyers help you plan ahead, accountants optimize what you already did.

Couple of thoughts;

1. Unless you are doing more than a half-million dollars of business a year, offshore is not likely worthwhile.

2. If you are a fee based consultant you probably don't have any advantage in offshore structures. Pretty much the last remaining legit offshore shelter strategy is based on licensing your own Intellectual Property/Trademarks and paying licensing fees to the offshore corp. Be prepared to justify the fees. And if you already have IP that you are going to move offshore, you will have to get legal advice on paying tax on the increased value of the asset. Pricing this is a whole field of its own.

3. If you are a fee based consultant, a Corporation (domestic or offshore) might not have much net tax savings unless you leave lots of money there for a long time and use that money to invest. When you ultimately want to take your money out, you will pay the full personal rate after you have already paid the corporate taxes.

4. Be careful to ensure you are in compliance with US immigration and IRS law if you are indeed working and spending 90% of your time in the US. If you are not, and get caught, your business will really hurt being barred rom the US.

Google "tax lawyer Toronto" and see whose website you like. Will be money well spent.
 

Fifi_ulla

Active member
Jul 19, 2013
109
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Seek advice from a tax lawyer not an accountant. Generally speaking, tax lawyers help you plan ahead, accountants optimize what you already did.

Couple of thoughts;

1. Unless you are doing more than a half-million dollars of business a year, offshore is not likely worthwhile.

2. If you are a fee based consultant you probably don't have any advantage in offshore structures. Pretty much the last remaining legit offshore shelter strategy is based on licensing your own Intellectual Property/Trademarks and paying licensing fees to the offshore corp. Be prepared to justify the fees. And if you already have IP that you are going to move offshore, you will have to get legal advice on paying tax on the increased value of the asset. Pricing this is a whole field of its own.

3. If you are a fee based consultant, a Corporation (domestic or offshore) might not have much net tax savings unless you leave lots of money there for a long time and use that money to invest. When you ultimately want to take your money out, you will pay the full personal rate after you have already paid the corporate taxes.

4. Be careful to ensure you are in compliance with US immigration and IRS law if you are indeed working and spending 90% of your time in the US. If you are not, and get caught, your business will really hurt being barred rom the US.

Google "tax lawyer Toronto" and see whose website you like. Will be money well spent.
Thanks. You're right - I need to find a lawyer. I wish my work was 500k :) it's about 100k USD a year and i'm a fee based consultant. It still hurts paying the corporate tax and then paying myself and paying income tax again, so even if i could lower the corporate tax by a few percentage points it's better than nothing. Like your signature said, it's good to have knowledge of what my options are. Over a few years it adds up... or then again more money to spend on the ladies LOL

@Billie good luck to both of us :) If I do get advice to act on I'll provide an update.
 

SchlongConery

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Jan 28, 2013
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Thanks. You're right - I need to find a lawyer. I wish my work was 500k :) it's about 100k USD a year and i'm a fee based consultant. It still hurts paying the corporate tax and then paying myself and paying income tax again, so even if i could lower the corporate tax by a few percentage points it's better than nothing. Like your signature said, it's good to have knowledge of what my options are. Over a few years it adds up... or then again more money to spend on the ladies LOL

@Billie good luck to both of us :) If I do get advice to act on I'll provide an update.

You can eliminate your corporate tax completely by winding up your corporation. Unless you risk incurring liability through your consulting advice you have no need for a corporation. You will save the corporate tax and the extra level of accounting and reporting. For a simple consultancy with gross income of under C$150k offshore is an absolute no-go. In fact, I don't even think it is worth consulting a tax lawyer either for that level of income unless you are wanting advice on the possible IRS tax implications of your primarily US business .

If you want to sound like a corporation then just register a name like "Everbrite Illumination Consultants" as a Sole Proprietor. Bring that registration to your bank and open an account and bill under that name. Register for HST etc under that Trade Name and away you go.

You can still expense business expenses etc. Just like a Corporation.

Google "Sole Prprietorship vs Incorporation Ontario" and see what you learn. But from what I can tell from what you have said, the only advantage to your incorporation is potential limiting your liability exposure if a client decides to sue you for bad advice. And you should have that professional liability insurance even if you are incorporated anyways.

Hope this helps. Let me know if you have any other questions.
 

Fifi_ulla

Active member
Jul 19, 2013
109
28
28
You can eliminate your corporate tax completely by winding up your corporation. Unless you risk incurring liability through your consulting advice you have no need for a corporation. You will save the corporate tax and the extra level of accounting and reporting. For a simple consultancy with gross income of under C$150k offshore is an absolute no-go. In fact, I don't even think it is worth consulting a tax lawyer either for that level of income unless you are wanting advice on the possible IRS tax implications of your primarily US business .

If you want to sound like a corporation then just register a name like "Everbrite Illumination Consultants" as a Sole Proprietor. Bring that registration to your bank and open an account and bill under that name. Register for HST etc under that Trade Name and away you go.

You can still expense business expenses etc. Just like a Corporation.

Google "Sole Prprietorship vs Incorporation Ontario" and see what you learn. But from what I can tell from what you have said, the only advantage to your incorporation is potential limiting your liability exposure if a client decides to sue you for bad advice. And you should have that professional liability insurance even if you are incorporated anyways.

Hope this helps. Let me know if you have any other questions.
The liability exposure is actually the main reason I incorporated, knowing the love affair the US has with lawsuits. I do have insurance as well.
 

SchlongConery

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Jan 28, 2013
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The liability exposure is actually the main reason I incorporated, knowing the love affair the US has with lawsuits. I do have insurance as well.

That makes a big difference.

You might minimize Corp taxes by always paying yourself your salary whenever you have income so the corporation breaks even.
 

FlorenceYi

Celebrating life one date at a time
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Sep 27, 2012
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This thread is golden. Thank you OP.

@SchlongConery - your #3: so, as long as the income sums from corporation are large enough, after paying 15% corporation tax as well as full personal marginal tax rate, saving a small % of tax can be significant and beneficial right? Also there's the benefit of using dividends as a strategy to decide when to declare amounts of income as opposed to having to declare same year with sole prop. I am hoping to be able to establish enough corporation credit history and invest through my corps eventually!

tax lawyer, here I come!!
 

Fifi_ulla

Active member
Jul 19, 2013
109
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@Florence, If you don't pay yourself a salary and only dividends, then the tax bill is lower (as long as you don't have secondary sources of income that bump you up to a higher bracket). If you pay yourself a salary from the Corp, while you are EI exempt as the owner, you still have to pay CPP part.
I'm still considering my options to see what other opportunities are available...as you indicated, one alternative is to invest the money into something else.
 
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