How to Reduce Corporate Tax Bill

Businesses are continually seeking ways to reduce costs and increase productivity. Economic troubles have adversely affected many companies, causing layoffs and cutbacks. However, there is an area that businesses can trim without sacrificing quality or manpower.

More and more companies are choosing to incorporate business at an offshore jurisdiction, and many corporations are utilizing offshore banking options. These options provide businesses with a legal, effective method of reducing their corporate tax bill.

Businesses have an obligation to their shareholders to keep profits high and taxes low. Google, for instance, only paid 2.4 percent in corporate taxes in 2010 by setting up a shell company in the Netherlands to receive all profits. Ireland does not tax profits in other European Union countries. The money was then sent to Barbados, which has no capital gains tax.

In many jurisdictions, income earned on offshore accounts is paid in whole without taxes being withheld. Corporations can transfer bank accounts from their home country to an offshore jurisdiction, as Google did, so that they can benefit from this tax reduction.

Some jurisdictions do not have Capital Gains Taxes and many have signed double tax agreements with other jurisdictions, preventing the potential for being taxed twice on the same income. Even if the bank account is held in a jurisdiction without a double tax treaty, a company can establish an Intermediary Holding Company or a shell company, as Google did in the Netherlands. This holding company can be established in a country with a suitable agreement and channel investments for the business.

The various jurisdictions each offer reductions for different types of taxes as well as breaks for different company vehicles. It is important that you review the different jurisdictions to determine which one best suits the needs of your offshore business.

A reduced corporate tax bill is not the only reason to consider an offshore bank account. Other benefits for offshore business formation jurisdiction include the protection of assets, better returns, complete confidentiality, and the ease of advancing overseas business interests.

http://www.belize.com/offshore-banking.html#ixzz1ICW8VJTC

http://offshoresimple.com/why_offshore.htm#4

http://en.wikipedia.org/wiki/Tax_haven

http://www.offshorelegal.org/offshore-tax/offshore-tax/reduce/lower-tax-liability-legally-offshore.html

http://www.businessweek.com/magazine/content/10_44/b4201043146825.htm

http://simonwillison.net/2004/Apr/5/whatIsGoogle/

http://www.theregister.co.uk/2011/01/20/google_q4_2010_results/

How Google Paid Almost No Corporate Taxes in 2010

Google isn’t just a search engine. It is a giant in the Internet realm with the “largest and most scalable platform” for web-based applications. With applications for individuals, businesses, and educators, Google provides Internet apps for everything from blog readers, checkouts, email, chat, calendar, and so very much more. And Google has the profits as proof of its status. Its net income for all of 2010 was $8.51 billion. Google is so big that its name has been deemed a verb by the Miriam-Webster Dictionary.

Google also managed to keep more of the profits by paying less in corporate income taxes in 2010. Using a complicated system that included techniques called the “Double Irish” and the “Dutch Sandwich,” Google reduced its corporate rate to just 2.4 percent.

The top five technology giants are Apple, Oracle, Microsoft, IBM, and Google, in no particular order. The other companies reported rates that ranged from 4.5 percent to as high as 25.8 percent on overseas earning between the years of 2007 and 2009. Even tax economists and experts are amazed at Google’s accomplishment, especially considering that many of the countries that Google operates in have high tax rates, averaging over twenty percent.

So what exactly did Google do?

To break it down to its simplest, Google funneled corporate income through Ireland, where its international operations is located, to a shell in the Netherlands, where it was transferred to Bermuda. Bermuda is a tax-haven that has no corporate income tax.

Google’s Dublin office – which receives payments from advertisers in Europe, the Middle East, and Africa – earned 88 percent of the $12.5 billion in sales outside the U.S. However, Google’s Dublin office only reported a profit of less than one percent, so it didn’t need to pay much of Ireland’s corporate tax, which is 12.5 percent. The money doesn’t stay in Dublin office, but Irish laws tax dollars sent directly to Bermuda, which is why it must first go to the Netherlands. Irish law does not tax some payments in other countries in the European Union.

The shell company in the Netherlands then transfers the money to Bermuda, which is technically an Irish company, which is why it is referred to as “Double Irish” or the “Dutch Sandwich.”

http://en.wikipedia.org/wiki/Tax_haven

http://www.businessweek.com/magazine/content/10_44/b4201043146825.htm

http://simonwillison.net/2004/Apr/5/whatIsGoogle/

http://www.google.com/apps/

http://www.theregister.co.uk/2011/01/20/google_q4_2010_results/

http://www.merriam-webster.com/dictionary/google

Legality of Offshore Banking

Choosing to go offshore is a decision that requires much research and contemplation. But worrying over the legality of it is not something that should be an issue.

Initially offshore business formation was a simple process which required very little in the form of verification or paperwork. Unfortunately, criminals took advantage of this fact, twisting the beneficial process into one that fit their needs – and concealed their identity and actions. Those involved in money laundering were able to hide the details of their bank transactions, and thereby hide from the law.

Changes were made to offshore banking to help stop those involved in illegal activities. It is no longer possible to conceal any electronic money transaction – be it bank to bank transfer or credit or debit card transfer. It is also no longer possible to conceal your identity behind an offshore business if that company has an offshore bank account. These changes were made to prevent illegal activities and allow legitimate investors to continue with business as usual.

Offshore banking has become increasingly popular, especially as investors attempt to protect their investments in a global atmosphere of unstable economies. Offshore banking provides a security and flexibility that is unavailable in homeland banking.

When choosing an offshore bank, one should talk to a knowledgeable agent to prevent making costly mistakes. Offshore banks are accountable to government regulations. Therefore, choosing a jurisdiction that fits your needs is especially important. The offshore bank itself should fit your banking requirements. Some offshore banking centers are larger than others and each is different. Qualified agents will know which one will be the best option for meeting your particular situation.

Unless your purpose is money laundering, tax evasion, or financing criminal activity, offshore banking is completely legal and actually quite popular. Today’s offshore banking centers require proper proof of the company’s existence and the account holder’s identity.

http://www.offshorebankingalert.com/

http://www.web-chamber.com/offshore-money-laundering-tax-savings-or-asset-protection

What is International Business Company Act of 1990

International Business Companies, or IBCs, are private companies that are well-known for their advantages as a tax-haven. Of all of the vehicles available for offshore business formation, IBCs are the most popular choice of investors. They are formed in different jurisdictions throughout the world, but Belize is of the most popular of these locations.

IBCs are formed in Belize under the International Business Companies Act of 1990. The law is considered one of the most progressive, easy-to-utilize pieces of legislation of its kind. Made with investors in mind, the law helped make Belize the popular jurisdiction for offshore business formation that it is today.

Officials sampled all of the best pieces of legislation from other offshore jurisdictions in order to create the IBC Act of 1990. In doing so, they created a law which provided privileges previously unheard of in the offshore business world, particularly in regards to confidentiality.

In order to receive all of the benefits of a Belize IBC, companies must be incorporated in Belize by a registered agent within the jurisdiction; however, companies may only engage in business outside of the jurisdiction.

Companies are guaranteed absolute privacy, whether they are involved in tax planning, real estate holdings, asset protection, investment purposes, or international flow of capital or financing.

Other advantages to an IBC in Belize through the International Business Companies Act of 1990 include tax exemption from all income earned by the IBC. IBCs are also exempt from taxes on all dividends paid; on interest, rent, or other compensations paid out; and on capital gains on shares, debts, or other securities.

Additionally, officers need not reside in Belize and shareholder meetings can be held anywhere in the world. Attendance can even be made by proxy, further easing an investor’s responsibilities.

The International Business Companies Act of 1990 not only benefited Belize as an offshore business jurisdiction, but also benefits any investor seeking to find the best solution for their offshore business needs.

To learn more about offshore business formation in Belize please leave a comment with your contact info and we will get back to you.

http://www.incorporatebelize.com/belize-ibc.php

Bank Secrecy Laws and Offshore Business Formation

One of the chief reasons for forming an offshore business is privacy and protection. Most jurisdictions offer confidentiality for investors, shareholders, directors, and officers of their offshore companies.

Individuals who wish to protect their assets from predatory litigation are wise to move their assets into a company that is located in an offshore financial center. These tax havens protect individuals from unauthorized access to financial records along with protecting the names and contact information for those involved with the business.

Bank employees may not legally divulge information about a client’s account without a court order. Most jurisdictions are serious about bank secrecy and employees who break the financial privacy laws are faced with huge fines as well as imprisonment.

Offshore financial centers are adamant about backing bank secrecy laws because doing so protects not only their clients, but their economy. If a jurisdiction was not tough on bank secrecy laws, than they would soon find investors choosing other jurisdictions for their offshore business.

Even if a court order is obtained, in most cases, the individual can only be tried if the crime he is accused of is against the law in his bank’s jurisdiction.

Because bank secrecy laws are so strict, banks have become much more picky about which clients they accept, particularly when it comes to offshore companies. Why? The fear and suspicion around money laundering and offshore businesses has exploded in the minds of individuals who may not be completely educated on the topic.

Bankers follow guidelines, procedures, and “suspicious activity indicators” in order to ensure that their clients are not criminals. But what is considered unusual account activity?

In 1995, Former U.S. Secretary of the Treasury Robert Rubin pointed out that the acts of money laundering are “often not only legal but commonplace.” He included in those activities the act of opening a bank account, wiring funds, and international trade.

So keeping your money and what you do with it private is not a crime. Opening your account for your offshore business is perfectly legal. However, because of the paranoia surrounding money laundering, opening a bank account has become a difficult procedure.

Resources:

http://www.offshoreincorporation101.com/bank-secrecy.html

http://www.offshore-fox.com/offshore-corporations/offshore_corporations_0303.html

http://www.offshore-fox.com/offshore-corporations/offshore_corporations_030302.html