Starting a Company in a Tax Haven? Possible?

TurkishDelight on 30/04/2017 - 20:11
Last edited 30/04/2017 - 20:40

Hello Smart people,

I am trying to start a new online business which will sell electronic goods like wifi routers and other electronic things internationally. The product will be sold under our business name (Our company logo and name), but in reality, it is going to get manufactured and shipped by some other company from China. That means I do not require a location or things for my business to run. All I will be doing is take order for say $50 and give an order to manufacturing company for $35, and he will print my logo and ship it to the clients. Now, I have two partners out of them one is an Australian citizen, and another one is a US citizen. Keeping the tax and other things in mind, out of Aus and US, which would be the more appropriate country to register this business? What are the pros and cons of each? Btw, I only have a bank account in Australia, if that matters.

Moreover, One of my partners was suggesting me to register this business in some tax haven country like the Cayman Islands, Panama or the British Virgin Islands. So the business will not have to pay the tax? (IDK much but maybe less tax?), but then it left me thinking that, what if we transfer the money back into our local bank accounts? Won't that be a taxable income?

TD.

Poll Options

  • 5
    Register it in US
  • 6
    Register it in Australia
Financial

Comments

  • MrHyde on 30/04/2017 - 20:26
    +4

    Yes, the company may not have to pay any tax; but an disbursement of money to the owners would count as foreign income for that person.

    • TurkishDelight on 30/04/2017 - 20:29

      You did business which made you one million $, but when you were about to pay tax, you told the government that you have to buy million $ goods from some other company, and you did not make a penny to pay the tax. However, the other company you bought the goods was your dad's business. Who lives in the Bahamas and don't have to pay tax so when you transfer the million $ to your dad you did not pay a penny on tax. Now your dad has million $ white and after tax. He moves back to Australia and brings back the money as his assets. There you have your full earnings without paying the tax of $400k.

      This was my friend's explanation.

      • MrHyde on 30/04/2017 - 20:33
        +2

        Yes, but when will your Dad move back to Australia. How long will you have to wait and what will you do after that. Will your Dad be moving back and forth? The ATO would look closely at that and may consider your Dad to be a resident of Australia for tax purposes - in which case, he would still be liable for Australian tax on any income he gets in the Bahamas as I don't think the Bahamas as a reciprocal tax agreement with Australia.

        • TurkishDelight on 30/04/2017 - 20:37

          Dad be moving back and forth?

          haha, I find it funny after picturing it.

          Yes, but when will your Dad move back to Australia

          For once it would be possible, wouldn't it?

  • CyberMurning on 30/04/2017 - 20:35
    +4

    Sorry cant help but I hate when reading ikea, Apple, Microsoft etc pay just little tax to Australia. It's just so wrong.

    • TurkishDelight on 30/04/2017 - 20:39
      +1

      I heard google started it with Ireland to save tax.

  • subywagon on 30/04/2017 - 20:41
    +3

    Maybe ask Malcolm Turnbull? I hear he's an expert on this kind of thing.

    • TurkishDelight on 30/04/2017 - 20:42

      Do you have his contact number? xD

      • subywagon on 30/04/2017 - 20:47
        +4

        Try (02) 9327 3988 or (02) 6277 7700. ;)

  • CheapskateQueen on 30/04/2017 - 22:44

    Just because a company isn't incorporated in Australia doesn't mean it's not a resident of Australia.

    If the central management and control of the company is here, it'll still be a resident here.

  • Diji1 on 01/05/2017 - 01:29
    +1

    You need to speak to a tax expert not random people on the internet.

  • 0p on 01/05/2017 - 01:46
    +2

    I heard the Bahamas are on Fyre…

  • Gagus on 01/05/2017 - 08:21
    +1

    So in the lifters/leaners debate you would be a leaner. Just pay your tax and don't be a mooch

  • Baysew on 01/05/2017 - 11:07
    +2

    There would be very substantial costs to do this, all for a company that hasn't made a dollar in profit.

  • munecito on 01/05/2017 - 13:58

    With regards to USA/Australia taxation. If you have a company in any of those countries which trades as an entity of a company in the other one then you only pay tax once.

    What it means is that Australia and the USA have a tax treaty in which you pay the tax in the country that generates the income and then you receive a tax credit when you file your return in the other country.

    For example. If you pay 20% in tax in the USA then your Australian managing company pays the difference in tax in Australia. Let's call it the extra 10%.

    There were other costs too as you have to submit returns in both countries, hence paying for an accountant in the USA and one here. The advantage is that you could register the company in one of the states with lower income taxes in the USA.

    With registering a company in a tax haven. It is all fine until you bring money into Australia. Then you have to pay the taxes. Unless you find a way to live without repatriating any dollars then you can legally avoid paying tax.

    That is my simplistic explanation but you would need to talk to an accountant that specialises in foreign generated income that is familiar with the legalities of any country you are thinking about setting up at.

  • [Deactivated] on 01/05/2017 - 18:37

    This is something you worry about for a large company earning big $$. Not a new startup.

    • TurkishDelight on 01/05/2017 - 21:43

      Yeah but 40%? That's nearly half of the earnings.

      • Baysew on 02/05/2017 - 08:11
        +1

        How do you arrive at 40%? The tax rate for companies with turnover up to $25 Million is 27.5%

        Tax is calculated on profits, not earnings.

  • [Deactivated] on 01/05/2017 - 20:02
    +1

    Most of the offshore banking schemes have been closed off over the last few years, which is a shame because there is a great Aussie bar in the Cayman Islands.

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