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  1. #1
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    Default Setting up an Offshore Company

    I figure someone here can probably point me in the right direction and hopefully some people have experience with this.

    I'm considering setting up an offshore company in a low tax country (eg The Bahamas). The aim of this would be for me to do my investment/trading via this company and realise my profits in the low tax country.

    Also does anyone know if it is possible to contract to an NZ company using the offshore company. By this I mean instead of me being employed as an employee here in NZ could I contract to NZ employer via my offshore company and then pay myself a smaller salary thereby reducing my overall NZ income?

    So anyone got any tips, comments etc?

  2. #2
    Legend shasta's Avatar
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    Quote Originally Posted by bambi View Post
    I figure someone here can probably point me in the right direction and hopefully some people have experience with this.

    I'm considering setting up an offshore company in a low tax country (eg The Bahamas). The aim of this would be for me to do my investment/trading via this company and realise my profits in the low tax country.

    Also does anyone know if it is possible to contract to an NZ company using the offshore company. By this I mean instead of me being employed as an employee here in NZ could I contract to NZ employer via my offshore company and then pay myself a smaller salary thereby reducing my overall NZ income?

    So anyone got any tips, comments etc?
    Bambi

    Unless you are about to seek advice from a tax professional what you are talking about doing, is in effect "tax avoidance" & complex to say the least.

    You would need to be a resident/tax resident in that country to receive any "tax concessions" from a low/no tax country.

    If you were an NZ resident for tax purposes & had an overseas company, there are many pitfalls.

    1. Income earned would be taxable in NZ anyway (unless resident in that country)

    2. Overseas companies (overseas shareholding > 25%) MUST be audited in NZ.

    3. The FIF regime caps the limit to which countries & how much income one can earn under "double tax agreements".

    4. Under the IRD criteria, just having property/family/ other investments in NZ would likely deem you an NZ resident for tax purposes.

    5. As for the "contracting back" comment, that would most likely be caught under the "thin capitalisation rules", or simply trying to transfer profits/income to a related entity in a lower tax country.

    There are many more issues for you to consider before proceeding with this idea, & i urge you to seek a professional opinion from a CA firm.

    Some questions you might like to ask yourself.

    1. Why am i doing this? (Please dont say to lower tax!)

    2. Does this fit within my long term goals/strategy?

    3. Where do i see myself residing?

    4. Is the money involved worth such a complex structure?

    5. Are you aware of the resolutions, costs, & ongoing administration required operating as a company?

    6. If what you wanted to do was so simple, lucrative & legal - wouldnt we all be doing it already?

    Disc: Ex PwC with a tax background.

  3. #3
    Tin-foil Hatter
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    Quote Originally Posted by bambi View Post

    Also does anyone know if it is possible to contract to an NZ company using the offshore company. By this I mean instead of me being employed as an employee here in NZ could I contract to NZ employer via my offshore company and then pay myself a smaller salary thereby reducing my overall NZ income?

    So anyone got any tips, comments etc?
    The short answer is "yes". NZ tax would apply to the portion of earnings that are extracted from the low-tax jurisdiction company to yourself. In fact, you could leave all the money as retained earnings in such a company and you wouldn't be paying any NZ tax.

    Get an issue of The Economist magazine and check the advertisements of law firms that are in the business of setting up such companies.
    God - Please give us just one more bubble....

  4. #4
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    Quote Originally Posted by patsy View Post
    In fact, you could leave all the money as retained earnings in such a company and you wouldn't be paying any NZ tax
    Heard of the CFC rules?

  5. #5
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    Thanks for the responses so far.

    Shasta: Thanks for disclosing you are ex PWC as it's always nice to know how much to trust info over the web.
    Patsey: I have been reading that more and more people in Canada are setting up companies like what I describe. And I have seen the ads in The Economist, I'm just hoping to get an NZ view and gather some more info first.

    It seems even more complex than I first thought. So if anyone can point me to a good NZ relevant website or a good book/document that I could read then please do.

    Oh and I will go see a tax professional before doing anything, I just want to gain some idea of what is needed and what I should know first.

  6. #6
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    Quote Originally Posted by bambi View Post
    Thanks for the responses so far.

    Shasta: Thanks for disclosing you are ex PWC as it's always nice to know how much to trust info over the web.
    Patsey: I have been reading that more and more people in Canada are setting up companies like what I describe. And I have seen the ads in The Economist, I'm just hoping to get an NZ view and gather some more info first.

    It seems even more complex than I first thought. So if anyone can point me to a good NZ relevant website or a good book/document that I could read then please do.

    Oh and I will go see a tax professional before doing anything, I just want to gain some idea of what is needed and what I should know first.

    Bambi, the Controlled Foreign Companies rules mean that if you own a foreign company, all of its income is attributed to you, and you must pay New Zealand tax on that income.

    Effectively this means there is no point in setting up a company in a low tax jurisdiction unless you plan on simply not reporting the income (which is punishable by criminal penalties).

  7. #7
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    Default RE: Setting up an Offshore Company

    Setting up a business in a different country is never easy but with the right direction & guidance, it can be a smooth & stress free process on the Philippines outsourcing. Once you have chosen your staff, you can teach them the culture and processes of the business. You can treat them the same way you treat your local team, and in no time they'll be able to understand how to get the job done and work the way you want them to. Some businesses saw this as an opportunity to offer new services that would create lots of job opportunities.
    Last edited by kayleycun; 10-08-2020 at 08:10 AM.

  8. #8
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    Quote Originally Posted by kayleycun View Post
    I will start off by apologizing if this isn't the right location for this post. I tried to search for similar topics, but couldn't find anything for my specific questions and then I found this. I really wanted to hire an offshore company in Australia if possible to help us on some of our business function but I don't know who and where to start especially now that there is a pandemic going on.
    Why not just setup a corporate company in Australia instead of 'to hire' one? There are no limitations on how you would contract to a corporate company (hence hire) but beware, you could also be out of pocket when things go bad. I personally would not feel comfortable channeling funds to a separate entity, especially one without my own control.

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