How to Take your Business Offshore

Taking a business offshore now and your offshore structure has to have real substance. No more trying to fake out the IRS, no more nominee directors nor shelf companies. Taking a business offshore now requires real work being done, a real office, and real employees.

This is a step by step guide for taking a business offshore:

Develop a business and tax plan
Although taxes should not drive the business most investors consider taking a business offshore to lower costs like tax and overhead.
Focus on employees when considering overhead. Most countries have lower wages than the US. The issue is finding high quality English speaking employees. The higher the skill levels required the harder it can be to find skilled employees.
There are two types of tax plans. One is for smaller businesses based on the Foreign Earned Income Exclusion (FEIE) and the second for bigger businesses that uses the transfer pricing model.

The Foreign Earned Income Exclusion is simple. The business owner live outsides of the US for Protected content of Protected content , or becomes a resident of the other country, and they claim over $100,000 in salary from the offshore business tax free.
Taking a big business offshore is a far more complex process. Companies that net profits of $1 million+ need significant tax plan. Especially if they have offices in the US as well as offshore. The big companies go offshore with the transfer pricing model assigning income to foreign subsidiaries based on the value added from that division. The US group is taxed on the value tat division creates.
Select the Country of Operations
The best jurisdiction for implementation of the tax and business plan should be chosen based on the plan. The chosen country must have a compatible tax system that does not tax foreign earned profits.

Qualified labor, is an important consideration. If the investor will be the only employee then it is not important and the country can be any that does not tax profits.
Quality of life is then balanced against overhead and taxes. Countries do not just have tax systems, they also have weather and cities and other lifestyle considerations.
Form a Corporation in the Country of Operations
A corporation is then formed in order to retain earnings offshore. An LLC or other structure is not appropriate for this purpose.

This corporation manages local expenses like payroll, office rent, and supplies.
Form Another Corporation in Another Tax Free Jurisdiction
A second corporation in another country will bill customers and could help minimize taxes in the country of operations. The country of operations may only tax profits brought into the country. If the corporation breaks-even annually, there will be no taxes due there. This does not affect US taxes but it should reduce or even eliminate local taxes in the country of operations. Click here to keep reading Protected content

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