Setup (Offshore) Companies To Minimize Tax

[Naam]

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

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

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

4. 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?

1. none of the well known offshore tax havens require any bookkeeping.

2. i suggest a BVI corporation.

3. i could only advise on Singapore but that would not be convenient for you as Singapore banks have become quite restrictive as far as corporate accounts are concerned. besides, you should use for the setup a company at the same location where your bank is. Hong Kong is the place for you to go.

4. for the umpteenth time... Thai citizens as well as foreigners do not pay income tax on any proceeds generated offshore if said income is not transferred in the same year when it was generated.

you still have not answered my question whether it is mandatory for your business to have a corporate account!

[Naam]

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?

that decision is yours. i just outlined available possibilities.

[affpartner]

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.

OK, thanks and do you personally know a renowned company for the IBC setup?

[Naam]

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

have the beer chilled icecold and expect me any time from now

[EvilDrSomkid]

Seems to me that you could avoid all the tax hassle with the Dutch authorities if you just sold the house in The Netherlands.

If you have no income in NL, no assets or other financial stuff, you are not liable to pay tax there anymore. Am I right?

Of course, trying to get rid of people renting your house can be a nightmare in NL and selling real estate in NL is equally a disaster now.

[affpartner]

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

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

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

4. 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?

1. none of the well known offshore tax havens require any bookkeeping.

2. i suggest a BVI corporation.

3. i could only advise on Singapore but that would not be convenient for you as Singapore banks have become quite restrictive as far as corporate accounts are concerned. besides, you should use for the setup a company at the same location where your bank is. Hong Kong is the place for you to go.

4. for the umpteenth time... Thai citizens as well as foreigners do not pay income tax on any proceeds generated offshore if said income is not transferred in the same year when it was generated.

you still have not answered my question whether it is mandatory for your business to have a corporate account!

Thanks again, but Hong Kong requires bookkeeping, so that cannot be used, not for setting up company or bank account, according to your requirements.

Nr 4 is all and well, but I cannot afford to be without income next year, as we are buying a house in Thailand by cash and need the money for it.

[affpartner]

Oh, sorry, for me personally there is no need for a corporate bank account.

[affpartner]

Seems to me that you could avoid all the tax hassle with the Dutch authorities if you just sold the house in The Netherlands.

If you have no income in NL, no assets or other financial stuff, you are not liable to pay tax there anymore. Am I right?

Of course, trying to get rid of people renting your house can be a nightmare in NL and selling real estate in NL is equally a disaster now.

That is indeed also an option and is correct, but since I net 1850 Eur per month from it and because of the market situation, that is not a real option at the moment.

[affpartner]

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

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

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

4. 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?

1. none of the well known offshore tax havens require any bookkeeping.

2. i suggest a BVI corporation.

3. i could only advise on Singapore but that would not be convenient for you as Singapore banks have become quite restrictive as far as corporate accounts are concerned. besides, you should use for the setup a company at the same location where your bank is. Hong Kong is the place for you to go.

4. for the umpteenth time... Thai citizens as well as foreigners do not pay income tax on any proceeds generated offshore if said income is not transferred in the same year when it was generated.

you still have not answered my question whether it is mandatory for your business to have a corporate account!

I am also a bit confused about nr 2 and 3. First you suggest a British Virgin Island corporation, then a Hong Kong bank account, but both company and bank account needs to be in the same country?

Sorry about all the questions, but I just don't get it yet.

[affpartner]

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

have the beer chilled icecold and expect me any time from now

Done!

[Naam]

Thanks again, but Hong Kong requires bookkeeping, so that cannot be used, not for setting up company or bank account, according to your requirements.

now it is getting expensive for you. no Chang, no Singha, no Amstel but Erdinger Weissbier... and more than one bottle!

i am typing now slowly that you don't miss an important part

Hong Kong does NOT require bookkeeping of a BVI company maintaining a corporate account with a bank located in Hong Kong and neither does Hong Kong require any bookkeeping/returns or levies any tax on a corporation incorporated in Hong Kong under Hong Kong law which does not do any business in Hong Kong.

[Naam]

First you suggest a British Virgin Island corporation, then a Hong Kong bank account, but both company and bank account needs to be in the same country?

the company which establishes the BVI corporation should be at the location of your bank.

besides, you should use for the setup a company at the same location where your bank is

when will you answer my question whether you need a corporation? and if you need a corporation WHY do you (think) you need one?

how can i give you proper advice if i don't know the whole background? more than half of your assumptions have no basis that's why i am trying to find out whether the demand for a corporation has or has no basis.

Edited June 20, 2011 by Naam

[affpartner]

Is Hoegaarden also OK?

OK, now it is finally dawning on me, the company setting up the BVI must be in the same country as the bank account. So I use a Hong Kong based company to form a BVI company and get a Hong Kong bank account. Check.

Is HSBC a good choice?

As for the reason why incorporating, I want to finally start doing tax avoidance and no more evasion, as I have been doing that for too long already. But other then that reason, tax avoidance, there is really no need for any kind of corporation.

[Naam]

As for the reason why incorporating, I want to finally start doing tax avoidance and no more evasion, as I have been doing that for too long already. But other then that reason, tax avoidance, there is really no need for any kind of corporation.

if you could explain to us why a corporation and the setup you have in mind means tax avoidance and not tax evasion all the beer will be on me. unfortunately you can't. the tax treaty between Thailand and Hong Kong does not affect your tax liability in the Netherlands. the fact remains that in the end you are the beneficiary because your work respectively setup generates the funds which your wife will use to buy food you will eat, a house in which you will live and most probably a car you will use.

in short, your complicated plan does not differ one iota from my simple suggestion "no company but bank account only, wife beneficiary, wife receives money, wife has neither in Thailand nor in the Netherlands any tax liability wife pays for (see above)".

dinner is served, i haven't had my pool dip yet. see you tomorrow.

[Khun Jean]

Maybe this is some information that can help:

http://www.previcus.nl/nieuwsberichten/wonen-in-het-buitenland-onroerend-goed-in-nederland

In my case i have two appartments that are both rented out. Both have a mortgage. You take the marketvalue and substract the estimated value by the government(WOZ -15% because it is a rented property). Over that amount you pay 1.2% tax (Box 3).

Example, your houses market value is 300.000, the woz = 250.000 you would need to pay:

300.000 - (250.000 - 37.500) = 87.500 * 0.012 = 1050 euro per year.

My solution would be, only when a corporate account and address is needed:

Hong Kong company

Hong Kong Bank Account

Many accountant/tax companies can incorporate a Hong Kong company for you and provide a virtual office and secretary.

Setting up will cost you around 1400 euro and yearly costs are around 700 euro and some costs for the hours the secretary needs to prepare the papers for minutes and of course audited accounts.

In my specific case i also have a Thai company which is a dealer of the Hong Kong companies products (software licences). The Hong Kong company aggregates the sales made by the Thai company and sends 1 invoice per month. Not much auditing is needed and mostly all the paperwork is done within a few hours, costing around 500 euro for everything.

Profit stays in the Hong Kong company which i can take out with an ATM or transfer with internet banking (Standard Chartered bank because they don't need you to go to Hong kong personally). Salary is drawn from the Thai company for which i pay income tax (for the warm fuzzy feeling i get contributing to the Thai economy ). My wife also has a salary as she is also employed by the Thai company.

A good summary for setting up a Hong Kong company can be found here:

http://cheungandsiu.com (I did not use them just a hit using google).

[affpartner]

Thanks for the suggestion regarding the house Khun Jean, but unfortunately that doesn't work in my case as the house is mortgage free and the rental price is more than the maximum allowed for "sociale woningen" so it wont classify as being under the "huurbescherming" and still requires me to pay more than 5.000 Eur in taxes. See "Dit is echter alleen het geval als de woning onder de huurbescherming valt" in your supplied link.

I was actually looking at the website of asiabs.com, which only charges about 800 Eur for setting everything up and around 600 Eur in total for everything needed the years after that. Only I don't know if that company is reputable or not.

Can you please advice which company you used to set everything up?

Thanks very much.

[affpartner]

As for the reason why incorporating, I want to finally start doing tax avoidance and no more evasion, as I have been doing that for too long already. But other then that reason, tax avoidance, there is really no need for any kind of corporation.

if you could explain to us why a corporation and the setup you have in mind means tax avoidance and not tax evasion all the beer will be on me. unfortunately you can't. the tax treaty between Thailand and Hong Kong does not affect your tax liability in the Netherlands. the fact remains that in the end you are the beneficiary because your work respectively setup generates the funds which your wife will use to buy food you will eat, a house in which you will live and most probably a car you will use.

in short, your complicated plan does not differ one iota from my simple suggestion "no company but bank account only, wife beneficiary, wife receives money, wife has neither in Thailand nor in the Netherlands any tax liability wife pays for (see above)".

dinner is served, i haven't had my pool dip yet. see you tomorrow.

Your simple suggestion is basically what I have been doing for the past few years (not my complicated plan), but is not legally correct as she is not the one working and we use the money every month and do not wait until the next year before bringing and using it in Thailand and are therefore legally obliged to pay tax in Thailand.

But I want to do it differently now, in a legally correct correct way, and therefore I started this thread with the very first sentence:

<quote>

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.

<unquote>

And that initial complicated setup was, according to my research, 100% legal = tax avoidance, as it involved a Hong Kong company which would pay tax on dividend paid out to my wife, the Thai company (which was director of Hong Kong company) would pay Thai tax and me personally would pay a very small amount of tax to the Dutch government, both on director fee of Thai company and dividend as shareholder. It also implied me getting a work permit as otherwise I cannot sign contracts or do any work. To top it off, it saved me more than a Million Baht in taxes (in comparison to option A below), so IMHO this IS tax avoidance. Hoegaarden for me please!

That, in my limited research, knowledge and general opinion, was the best way I could think of in order to minimize taxes in a legal way = tax avoidance

But since this is not my area of expertise, I thought it beneficial to start a thread here.

But lets go back a few steps and cover the basics.

Basically there are 3 ways of handling taxes:

A ) paying too much tax in a legal way = tax stupidity

B ) not paying or not paying enough tax in an illegal way = tax evasion

C ) not paying too much tax in a legal way = tax avoidance

My opening sentence should have made clear that I am interested in option C, if not, then maybe I should have repeated it and I'm sorry.

Option A (in case work permit is necessary) would involve me starting a Thai business, pay taxes on it in Thailand, supply my worldwide income to the Dutch government who would impose higher taxes and give deductions on my already paid Thai taxes in order to not be double taxed. If no working permit is necessary, then it would involve me supplying my worldwide income to the Dutch government and be highly taxed on it.

Option B is dependent on either or both the notion that the Dutch and/or Thai government will not find out that I do anything illegal. Since the Dutch government is more active in pursuing illegal matters than the Thai government, it makes perfect sense to put everything in my Thai wife's name without any kind of corporation/company, which is what I have been doing the past few years.

Option C is the most difficult as everything needs to be legally correct in order to avoid paying too much tax and this is what I am interested in.

Now of course the very first question should be: Do I need a work permit or not?

Lawyers say mostly yes, immigration says mostly yes and the public just says whatever they feel like saying on that particular moment.

If wanting to avoid any kind of (future) problems, then a work permit is necessary, which in turn means that a Thai company is necessary, which in turn means that there is a need for another company somewhere, as otherwise it would be option A and that is of course not very smart.

If, for sake of argument, it is not necessary for me to have a work permit, then the Thai company is not necessary anymore, but it does mean that a company is needed somewhere along the line, as otherwise it would make it option A again and that is of course not very smart.

So, IMHO, in order to legally avoid paying too much tax, it should always involve a company.

To further specify and summarize in order to fully understand what I am asking advice for:

I can live with the fact that I take a gamble with regards to needing a work permit or not, I cannot live with tax evasion anymore nor can I live with tax stupidity . Given my situation, preferences and knowing my business, what is the best strategy to avoid paying too much tax?

And please remember that I cannot afford to not use the money for one year.

[manarak]

Some points from my side (btw, I too run an internet-based company)

For me, a corporate account is necessary if you want to have a bit of privacy, otherwise:

- the domain registrars will be able to tell you own the domains

- everyone that has to send money to you will know your name

- everyone you send money to will know your name

- the credit card will have your name on it

- if you use any payment solutions for your sites, your name may appear on the payment forms

etc.

(if any investigation of your tax status takes place, these are easy finds, no need for official international inquiries and legal assistance between countries)

As I already wrote earlier in the thread, my bank is Credit Suisse in Zurich, and I have setup the account myself.

BVI is a good jurisdiction because it has liberal UK Common Law that doesn't interfere with most internet-based business, and you can do gambling, pharmacy, adult stuff, etc. if you like.

It doesn't require bookkeeping.

I can provide a contact with the company I used to setup the IBC if you so wish.

To summarize, my solution is: BVI company + Swiss bank account

Should work well for you too.

You could also be happy with a bank in Hong Kong as Naam suggests - though I don't know the strength of banking secrecy there, and I don't know if the bank will provide you with a credit card on the company's name (i.e. not showing your name)

Other nice things I got at CS include their excellent online-banking and currency accounts in EUR, USD, CHF...

Edited June 20, 2011 by manarak

[affpartner]

Thanks once again for your detailed information manarak.

I would appreciate it if you can give the details of the company you used to set up the BVI, either here or by PM.

Also have some additional questions if you don't mind.

- Did you have to personally go to Credit Suisse bank to open the account and do you need to do it in Switzerland or can it be done through any of their worldwide offices?

- Can the bank account also hold THB?

[Khun Jean]

Thanks for the suggestion regarding the house Khun Jean, but unfortunately that doesn't work in my case as the house is mortgage free and the rental price is more than the maximum allowed for "sociale woningen" so it wont classify as being under the "huurbescherming" and still requires me to pay more than 5.000 Eur in taxes. See "Dit is echter alleen het geval als de woning onder de huurbescherming valt" in your supplied link.

You will not be able to get out of this tax. I would be happy to be in that situation and pay that 5.000 euro tax.

It does mean however that your income made outside of The Netherlands is not being taxed, unless you are still registered in The Netherlands! To be seen as a income taxable person you would have to be in and registered in The Netherlands for more than 180 days in a tax year.

I was actually looking at the website of asiabs.com, which only charges about 800 Eur for setting everything up and around 600 Eur in total for everything needed the years after that. Only I don't know if that company is reputable or not.

Can you please advice which company you used to set everything up?

I used my wife's sisters husbands sister (how do you call someone that far up the family line ) who is a Hong Kong resident and a secretary. She is not looking for more work/clients however.

[affpartner]

You will not be able to get out of this tax. I would be happy to be in that situation and pay that 5.000 euro tax.

It does mean however that your income made outside of The Netherlands is not being taxed, unless you are still registered in The Netherlands! To be seen as a income taxable person you would have to be in and registered in The Netherlands for more than 180 days in a tax year.

Indeed it suggests nice things, but I am never too happy about paying tax!

The part about not being taxed on income in the Netherlands is extremely good news, does this then also mean that they will never investigate me anymore, as long as I keep being officially registered outside the Netherlands? Or is that too much to hope for?

[manarak]

Thanks once again for your detailed information manarak.

I would appreciate it if you can give the details of the company you used to set up the BVI, either here or by PM.

Also have some additional questions if you don't mind.

- Did you have to personally go to Credit Suisse bank to open the account and do you need to do it in Switzerland or can it be done through any of their worldwide offices?

- Can the bank account also hold THB?

About the identification, I guess it can be done in one of their offices, not sure if the people working there know about that though.

For example in Singapore.

THB: I'll have to ask, since I sue my Kasikorn account to hold THB, and the conversion rate is much better if I just send EUR or USD to Kasikorn than to change the cash at CS.

About the company, please provide me (send PM) with your email, and I will ask them to contact you.

Edited June 20, 2011 by manarak

[Khun Jean]

You will not be able to get out of this tax. I would be happy to be in that situation and pay that 5.000 euro tax.

It does mean however that your income made outside of The Netherlands is not being taxed, unless you are still registered in The Netherlands! To be seen as a income taxable person you would have to be in and registered in The Netherlands for more than 180 days in a tax year.

Indeed it suggests nice things, but I am never too happy about paying tax!

The part about not being taxed on income in the Netherlands is extremely good news, does this then also mean that they will never investigate me anymore, as long as I keep being officially registered outside the Netherlands? Or is that too much to hope for?

It works for me (10+ years off and on in Thailand), i am still not being imprisoned when i enter Schiphol.

However, there is always some tax to pay.

No experience but what would the situation be if your house was owned by the BVI or Hong Kong company? Maybe worth investigating.

I would suggest also paying a little tax in Thailand. Always makes good appearances, and that is worth something too. Another thing to do is to contribute to your AOW (state retirement insurance fund). You would have to calculate for your circumstances if it makes sense.

[Naam]

It works for me (10+ years off and on in Thailand), i am still not being imprisoned when i enter Schiphol.

However, there is always some tax to pay.

No experience but

1. what would the situation be if your house was owned by the BVI or Hong Kong company? Maybe worth investigating.

2. I would suggest also paying a little tax in Thailand. Always makes good appearances, and that is worth something too. Another thing to do is to contribute to your AOW (state retirement insurance fund). You would have to calculate for your circumstances if it makes sense.

1. in Germany it is not a matter of ownership it is a matter whether any dwelling is available for living purposes (house, rented apartment or it could be even a tent!), no matter whether you actually use it or not. but yesterday a Dutch friend confirmed "out of the Netherlands for more than 183 days = no income tax". unfortunately we don't have that option in Germany.

that is a difficult undertaking Khun Jean. if you are just a retiree without work permit and no domestic Thai income you can't pay Thai taxes even if you are willing to pay. for reasons of my own i tried several years ago to pay taxes but failed.

[affpartner]

Indeed I am going to ask about if that is possible, concerning putting the house in name of the company, thanks again for the suggestion.

As for paying tax in Thailand, indeed it makes for good appearance and I am more then happy to do so, only am not really sure how to do it. Retirement is another 30 odd years away for me, so maybe that makes things a bit more easy.

I guess it, again, comes down to if I can work without work permit or not...

Since I live here full time and only leave Thailand for holidays (be it Holland, Europe or somewhere in Asia), any work related income will be suspicious in Thailand, i.e. hard to proof that all income is done in the 6 odd weeks abroad.

I guess I could pay tax on dividend in Thailand without needing a work permit, have to look into it further to see if it makes sense or not.

Thanks again everybody for your input, it is much appreciated!

[Naam]

Since I live here full time and only leave Thailand for holidays (be it Holland, Europe or somewhere in Asia), any work related income will be suspicious in Thailand, i.e. hard to proof that all income is done in the 6 odd weeks abroad.

i have some solutions for your problems as specified hereafter:

-take a bottle of icecold <insert preferred brand of beer> and settle in a dark corner of your house. take slowly sip after sip and wait till the attack of nonsensical thoughts recedes,

alternatively

-ask your wife to knock you several times (max 6 times) with a (not too) hard object at the back of your skull to enhance logical thinking.

to be continued...

:jap:

[affpartner]

I am guessing dinner was overcooked, pool was empty, loud noise next door last night and no breakfast this morning?

[Naam]

I am guessing dinner was overcooked, pool was empty, loud noise next door last night and no breakfast this morning?

none of the above

[affpartner]

Thanks again, but Hong Kong requires bookkeeping, so that cannot be used, not for setting up company or bank account, according to your requirements.

now it is getting expensive for you. no Chang, no Singha, no Amstel but Erdinger Weissbier... and more than one bottle!

i am typing now slowly that you don't miss an important part

Hong Kong does NOT require bookkeeping of a BVI company maintaining a corporate account with a bank located in Hong Kong and neither does Hong Kong require any bookkeeping/returns or levies any tax on a corporation incorporated in Hong Kong under Hong Kong law which does not do any business in Hong Kong.

Since above supplied information contradicts every information I have read, I send an email to the Hong Kong Inland Revenue Department with the following question:

<question to HKG IRD>

I have heard that as long as a corporation incorporated in Hong Kong under Hong Kong law which does not do any business in Hong Kong, that Hong Kong does not require any bookkeeping/returns or levies any tax.

Is that correct?

</question to HKG IRD>

<answer from HKG IRD>

Dear Sir / Madam,

Thank you for your e-mail of 22.6.2011.

Every person carrying on a trade, profession or business in Hong Kong must keep sufficient records of his income and expenditure (either in English or in Chinese) to enable his assessable profits to be readily ascertained. There are statutory requirements to record certain specified details of every business transaction. Business records must be retained for at least 7 years after the date of the transaction to which they relate. This is a requirement in Section 51C of the Inland Revenue Ordinance (cap 112 of the Law of Hong Kong).

If the business to be formed is a corporation, then there is other requirement that it has to comply with, preparing audited accounts annually is one of them. For more information, please check with the Companies Registry @ www.cr.gov.hk direct.

Concerning filing of return and payment of tax. If a tax return is issued by the Inland Revenue Department. It is the taxpayer’s obligation to file it within the required period, irrespective of whether it is doing business or not. Failure to do so may results in prosecution to follow up the tax return and the issue of estimated assessment for tax. For your information, all newly registered businesses are issued with Profits Tax Returns some 18 months after registration / commencement of business.

Yours faithfully,

---name officer --

Senior Assessor, Profits Tax</answer from HKG IRD>

[Naam]

Every person carrying on a trade, profession or business in Hong Kong...

is your [potential] HK company carrying out any business in Hong Kong or is it only incorporated in HK jurisdiction? you got a standard copy and paste answer from a clown who did not fully read or did not understand your question.

was your question rhetoric and you still want to proceed with the much cheaper BVI corporation?