Setup (Offshore) Companies To Minimize Tax

[affpartner]

Hi there,

I am looking into the possibility of starting one or more companies and would like to know what is the best way of doing this in a legal way without paying too much tax.

First let me tell somethings about my background and business.

- Dutch national who has been living in Thailand full time multiple years and will continue to live here full time

- Am married to a Thai and have a son with dual nationality

- Own a house in the Netherlands and am therefore liable to pay tax there and supply my worldwide income to them and pay tax on it

- Own a good number of websites with which I earn substantial income through affiliate business. Meaning that nothing is either bought or sold through my websites, visitors are merely redirected to other websites and for that redirection I get money. So in short E-Commerce based on affiliate income

- Do not have any affiliations whatsoever with any kind of Thai business

- All income and affiliations are with either US or Australian companies and all pay in USD

If I would simply start a Thai Limited Company, then both director fees and dividend are taxable in the Netherlands at a high rate, which I am trying to avoid.

So here is my thinking.

- Start a Hong Kong Limited Company with a Thai company as director and my wife as sole shareholder

- Hong Kong company will act as starting point for all things related to my business

- Hong Kong incorporated companies who do not do any kind of business in or with Hong Kong are exempt from all taxes

- All profits from Hong Kong company will be paid out to my wife and according to the tax treaty between Hong Kong and Thailand, Hong Kong company will withhold 10% tax on the dividend and in Thailand my wife has no more tax to pay on that dividend/profit

- The (small) directors fee of the Hong Kong company will be the sole source of income of the Thai company

- Thai company will have me as director and one of the shareholders, the remaining 2 shareholders will be my son and a good Thai friend

This way the tax of the Thai company is only based on the (small) directors fee of the Hong Kong company and therefore my tax liability will be minimal and all profits are only taxed at 10% to my wife through dividend.

Now the big question:

- Is my above thinking correct or am I missing something(s) or is it not feasable or is it illegal or are there better ways to set things up in order to minimize taxes?

Thanks very much.

[Sunbelt Asia]

I am afraid that Sunbelt Asia does not set up offshore companies. As this is not our area of expertise I will ask a forum moderator to move this into the Business forum so others may have the opportunity to answer it.

[Khun Jean]

- Own a house in the Netherlands and am therefore liable to pay tax there and supply my worldwide income to them and pay tax on it

Do you have a reference for this, i never heard of this rule.

[muratremix]

Do you have a company in the Netherlands? I mean, for your affiliate based income? If not, you don't have to open one in here. You can open a bank account where you are tax exempt or paying very little tax like HK and receive your funds to there. Then, use your ATM in Thailand to withdrawal cash.

[Naam]

- Own a house in the Netherlands and am therefore liable to pay tax there and supply my worldwide income to them and pay tax on it

Do you have a reference for this, i never heard of this rule.

i'm not sure about the Netherlands but exactly that is the case in Germany where "a dwelling suitable for living purposes available at any time, no matter wether owned or rented" makes you liable to pay income tax on your worldwide income even if you haven't entered the country for years.

[EvilDrSomkid]

- Own a house in the Netherlands and am therefore liable to pay tax there and supply my worldwide income to them and pay tax on it

Do you have a reference for this, i never heard of this rule.

According to Dutch tax law, if you own a house in the Netherlands you have to pay tax on it. However, since he says he lives full time in Thailand, he should qualify for paying less tax and should not be liable for income in Thailand. There is a double taxation avoidance rule in NL. You have to prove you are tax resident in another country. If you pay tax on your income in another country, Thailand or HK, you can declare that to the Dutch authorities and apply for "Tax equalization".

I did something similar. When I was on assignments in other countries, I got paid locally. OP should get a tax attorney in NL and explain the situation.

On second thought, why would have to pay tax on his world income if he is not resident any more in NL.

affpartner, ben je nog ingeschreven in het GBA?

[Naam]

Is my above thinking correct or am I missing something(s) or is it not feasable or is it illegal or are there better ways to set things up in order to minimize taxes?

if a company account is not mandatory to receive any payments your whole rather complicated setup is a waste. Hong Kong bank account, beneficiary your Thai wife, power of attorney for you = not a single penny taxes neither Hong Kong nor Thailand nor Netherlands.

[affpartner]

- Own a house in the Netherlands and am therefore liable to pay tax there and supply my worldwide income to them and pay tax on it

Do you have a reference for this, i never heard of this rule.

See for example hypotheekenbuitenland.nl/tekst_sub.asp?dc=B163&Cat=B&Mnu=B and rnw.nl/nederlands/article/wonen-het-buitenland-onroerend-goed-nederland

Sorry, cannot find good information from the belastingdienst themselves.

It has to do with "keuzerecht" for being treated as citizen or non-citizen, what either means 1.2% tax on value woning (WOZ) or pay tax on rental income, which in my case is almost the same. There are a few exceptions when you don't have to pay the 1.2% tax on WOZ and I did use them in 2009, for example house empty and for sale, but since it really is rented out and not for sale, in reality I have to pay either tax.

[affpartner]

- Own a house in the Netherlands and am therefore liable to pay tax there and supply my worldwide income to them and pay tax on it

Do you have a reference for this, i never heard of this rule.

According to Dutch tax law, if you own a house in the Netherlands you have to pay tax on it. However, since he says he lives full time in Thailand, he should qualify for paying less tax and should not be liable for income in Thailand. There is a double taxation avoidance rule in NL. You have to prove you are tax resident in another country. If you pay tax on your income in another country, Thailand or HK, you can declare that to the Dutch authorities and apply for "Tax equalization".

I did something similar. When I was on assignments in other countries, I got paid locally. OP should get a tax attorney in NL and explain the situation.

On second thought, why would have to pay tax on his world income if he is not resident any more in NL.

affpartner, ben je nog ingeschreven in het GBA?

I am no longer registered as living in Holland (dus niet ingeschreven in het GBA), I officially moved out on 01-01-2009

Indeed I will contact a tax attorney when I am in Holland again, which should be August this year, thanks.

[affpartner]

Is my above thinking correct or am I missing something(s) or is it not feasable or is it illegal or are there better ways to set things up in order to minimize taxes?

if a company account is not mandatory to receive any payments your whole rather complicated setup is a waste. Hong Kong bank account, beneficiary your Thai wife, power of attorney for you = not a single penny taxes neither Hong Kong nor Thailand nor Netherlands.

That of course sounds very interesting, but in since there are rules and regulations about filing and reporting tax returns in Hong Kong for that based company, wouldn't it be impossible to set it up like you suggested as then the books are not correct anymore?

I understand that I can also opt for incorporating in the Seychelles for example where it is not mandatory to keep and file reports, but this is still considered tax evasion, isn't it?

At the moment I am actually also evading tax, but since the income from the internet business is quite substantial, around 5.000.000 Baht per year, I am actually thinking about doing it the legal way.

Another point of difficulty is whether or not I need a work permit in Thailand, it seems that there is a lot of confusion about it. I read here thaivisa.com/forum/topic/473613-working-legally-in-thailand-immigration-and-labour-departments-speaks-out/ and here thaivisa.com/forum/topic/476304-working-remotely-in-thailand/ that some Thai officials say that as long as I work at home and don't do any business with a Thai national or company and income is paid from overseas, there is no need for one.

If that is really true, then my setup is definitely a waste and offshore only is the way to go.

For sake of looking legit, I much rather have a Hong Kong based company, but I am a bit concerned about the need to file and report all earnings of it and therefore I think I cannot simply use a personal bank account, I think. Or can I?

Edited June 20, 2011 by affpartner

[affpartner]

Do you have a company in the Netherlands? I mean, for your affiliate based income? If not, you don't have to open one in here. You can open a bank account where you are tax exempt or paying very little tax like HK and receive your funds to there. Then, use your ATM in Thailand to withdrawal cash.

I do not have a company in the Netherlands. But that is still tax evasion, isn't it?

[affpartner]

For sake of argument, lets say that in my situation I do not need a Thai work permit. But actually I would still like to know other peoples opinion on it, especially if backed up with proof.

If I were to incorporate in a country with zero tax and no filing and reporting needs, for example in the Seychelles. what happens if set up as follows.

- Incorporate as IBC in the Seychelles with a nominee director and through letter of Power of Attorney, the beneficial owner will be me.

- Use nominee shareholder and again through letter of Power of Attorney, the beneficial owner will be me

- Setup company bank account either in Seychelles, Switserland or somewhere else. The bank would still need a copy of my passport and will therefore know that I am the beneficial owner of the bank account.

- Withdraw funds immediately through that company account through ATM's

To me it looks like this way, officially, even though my name doesn't appear in any business documents, that since I am the beneficial owner, I would still have to report my income to the Dutch government and pay tax on it.

To me it looks like this way is still tax evasion, only a bit harder for the Dutch government to find out. But since banks are more and more pushed to report any kind of unusual activity and by definition offshore companies with offshore bank accounts can be considered unusual, that the chance of me being reported to the Dutch government is pretty high.

Is that correct, do I worry too much or not enough is it legal?

[Naam]

Is that correct, do I worry too much or not enough is it legal?

you are worrying too much and you missed my advice naming your wife as a beneficiary no matter whether it is corporate or a personal bank account (where you in both cases hold exclusive power of attorney).

two caveats:

-the beneficiary(ies) of a corporation cannot differ from those submitted when establishing a corporate bank account, id est you cannot be the corporation's beneficiary and your wife the account's beneficiary.

-the old method using bearer shares to hide the beneficiary does not work either nowadays. banks are refusing to open corporate accounts for companies using bearer shares (except when publicly listed and traded).

any profits derived from your business can be transferred tax free to Thailand if transferred not in the same year when they were generated. i assume your wife does not hold Dutch citizenship and is therefore not liable to pay Dutch income tax.

where's your problem?

[Naam]

To me it looks like this way, officially, even though my name doesn't appear in any business documents

that is not correct. the name of the beneficiary does appear in a separate (not public) document and the nominee directors have to submit that name to the bank together with all other required documentation. furthermore banks will ask from time to time for an update on the corporation (one of the reasons is to verify that the corporation still exists) as well notice if there was a change of beneficiary.

important: get advice from the bank of your choice what documents are needed to establish a corporate account. banks' requirements differ! if additional documents are required it might turn out time consuming and expensive.

[Naam]

Incorporate as IBC in the Seychelles with a nominee director and through letter of Power of Attorney, the beneficial owner will be me.

another wrong assumption. Power of Attorney does not indicate the beneficiary. you can have a dozen beneficiaries without PoA and PoA for a dozen persons which are not beneficiaries. example: one of our corporations has seven beneficiaries (they are our heirs) but only my wife and myself hold Power of Attorney as far as the corporation and the bank account is concerned.

any additional questions and you have to invite me for a bottle of Chang (or two)

[manarak]

- Own a house in the Netherlands and am therefore liable to pay tax there and supply my worldwide income to them and pay tax on it

Do you have a reference for this, i never heard of this rule.

i'm not sure about the Netherlands but exactly that is the case in Germany where "a dwelling suitable for living purposes available at any time, no matter wether owned or rented" makes you liable to pay income tax on your worldwide income even if you haven't entered the country for years.

I'm glad I don't have that anymore - are they nuts?

[affpartner]

Thanks very much for all your help Naam, it is much appreciated and I would be more then happy to invite you for a few bottles of Chang, especially if you live near Hua Hin, just let me know!

Since I actually do have more questions, I hope you do live in this area so we can discuss things further.

[manarak]

for the OP, I would think the easiest way would be to create an IBC with nominee director in a jurisdiction that is not directly in the EU or US sphere of influence, and which does not require bookkeeping.

Your nominee can sign sign all agreements for the company - hosting, affiliate constracts, payment processor contracts.

Then open your account in a country that upholds banking secrecy: Switzerland or Singapore for example, and be the exclusive POA on that account.

Get an impersonal credit card issued on the company name to pay for your domains, so the domain registrar doesn't have any other info than the company name either.

Ask the banks beforehand if they provide that type of card - Credit Suisse in Switzerland does.

Also open a personal account in the same bank to regularly transfer your cash to it, to minimize risks of intrusion.

With that setup, only your nominee director's study (I got a BVI lawyer as director) and the bank (Credit Suisse in my case) will know the beneficial owner.

Both would require an official international investigation for disclosing it, which requires a dutch court order, and then an official demand for international help from both Switzerland and the BVI, court decisions in both BVI and Switzerland... And this supposes that they somehow were able to track your name in connection to your business, which is unlikely.

I think there is no chance the NL would engage in such hassles to scrape some peanuts off your income.

Regarding taxation in Thailand, there is that one year rule - any income earned abroad but that isn't brought into Thailand within one year from being earned, isn't subject to tax and can be brought to Thailand later tax free. So you would only need to maintain a balance of 5000000 on your foreign account to legally avoid Thai tax (first in, first out).

Edited June 20, 2011 by manarak

[affpartner]

Thanks very much for all your help Naam, it is much appreciated.

And since I do have more questions, I hope you live near Hua Hin, so I can invite you for a few bottles of Chang, let me know please.

<edit> sorry for double post, server of thaivisa gave errors and thought the first one didn't get through </edit>

Edited June 20, 2011 by affpartner

[affpartner]

for the OP, I would think the easiest way would be to create an IBC with nominee director in a jurisdiction that is not directly in the EU or US sphere of influence, and which does not require bookkeeping.

Your nominee can sign sign all agreements for the company - hosting, affiliate constracts, payment processor contracts.

Then open your account in a country that upholds banking secrecy: Switzerland or Singapore for example, and be the exclusive POA on that account.

Get an impersonal credit card issued on the company name to pay for your domains, so the domain registrar doesn't have any other info than the company name either.

Ask the banks beforehand if they provide that type of card - Credit Suisse in Switzerland does.

Also open a personal account in the same bank to regularly transfer your cash to it, to minimize risks of intrusion.

With that setup, only your nominee director's study (I got a BVI lawyer as director) and the bank (Credit Suisse in my case) will know the beneficial owner.

Both would require an official international investigation for disclosing it, which requires a dutch court order, and then an official demand for international help from both Switzerland and the BVI, court decisions in both BVI and Switzerland...

No chance the NL would engage in such hassles to scrape some peanuts off your income.

Regarding taxation in Thailand, there is that one year rule - any income earned abroad but that isn't brought into Thailand within one year from being earned, isn't subject to tax and can be brought to Thailand later tax free. So you would only need to maintain a balance of 5000000 on your foreign account if you ever get asked.

Thanks very much manarak, is also a very interesting option.

Can you tell me which company you used to setup the IBC, as it is difficult to know which one to trust and if they have treated and are treating you correctly, then I might contact them to set something up similar to what you have.

As for the one year tax rule in Thailand, does that mean I will have to wait 12 months from time of incorporation to transfer the funds tax free, or is it calculated by calendar year or bookkeeping year?

[manarak]

Naam lives near Pattaya :-)

[Naam]

Naam lives near Pattaya :-)

my bad luck. there goes the Chang

[Naam]

As for the one year tax rule in Thailand, does that mean I will have to wait 12 months from time of incorporation to transfer the funds tax free, or is it calculated by calendar year or bookkeeping year?

it is calendar year. but nobody will bother about incorporation of the IBC or ask any questions. as far as funds generated and transferred from offshore are concerned Thailand is a tax paradise.

[Naam]

And since I do have more questions

if among these are some questions you don't want to discuss publicly you are welcome to contact me by personal messenger. but you should take into consideration that one day i'm going to ring to door bell in Hua Hin and ask for my beer (not necessarily Chang but Amstel or Grolsch).

[Naam]

Can you tell me which company you used to setup the IBC, as it is difficult to know which one to trust and if they have treated and are treating you correctly, then I might contact them to set something up similar to what you have.

you forgot already what i told you first bank requirements, then IBC!

[manarak]

Can you tell me which company you used to setup the IBC, as it is difficult to know which one to trust and if they have treated and are treating you correctly, then I might contact them to set something up similar to what you have.

you forgot already what i told you first bank requirements, then IBC!

I concur, the bank account is what counts.

[affpartner]

Thanks again Naam and I actually didn't forget about the bank requirements, it is just that from what I understand is that whatever company you use to setup the IBC, that company will also handle the registration of the bank account. Hence I need a good and reliable company which can set up the IBC AND has connections to banks which don't require too much information.

I understand that I can also setup the bank account myself, but I would rather have that the company setting up the IBC does it for me.

Since I don't mind asking questions in public and it would be my honor to treat you to some beers whenever you are in Hua Hin, here goes!

- Do I need to be incorporated in a country which does not require bookkeeping?

- Do you know of a country which is both reliable and one that you can recommend?

- Do you know of a reliable company who can setup the IBC?

- If my wife (who only has Thai citizenship) is both the beneficiary of the company and bank account, isn't she liable to pay tax in Thailand?

- Or doesn't it matter since you already said that Thailand in general doesn't care about funds generated and transferred from offshore?

- Also since at the moment all money is already transferred directly into my wife's Thai bank account (although all contracts with affiliate programs are in my personal name) since she is much better at saving money then me, can I not simply forget the Power of Attorney?

Thanks again and let me know when you plan to visit Hua Hin!

[manarak]

Since the question is directed at Naam, I'll let him reply, but with a proper setup, you could leave the wife completely out of it.

[affpartner]

Since the question is directed at Naam, I'll let him reply, but with a proper setup, you could leave the wife completely out of it.

You are more then welcome to fully outline what according to you the best setup is, indeed it would be extremely much appreciated.

Do you have anything to add to what you already said in reply #18 see thaivisa.com/forum/topic/476255-setup-offshore-companies-to-minimize-tax/page__view__findpost__p__4501135

Especially of interest is which company you used to establish and maintain the BVI and if they or you opened the bank account and which specific bank account it is.

Thanks again.

[Naam]

from what I understand is that whatever company you use to setup the IBC, that company will also handle the registration of the bank account

that is some sort of fairy tale and offered only by shady setup companies which might (or might not) provide a bank account in an obscure and shady bank. the other (quite expensive) way is that the bank you select arranges the setup of the corporation. but then you usually pay through your nose for the setup and the annual running cost.

if you want to do it properly use a renowned company for the IBC setup, preferably one recommended by the bank where you are planning to have your account.