
NEED HELP! offshore tax havens, income tax, company registration..?
Hello,
Starting two online based businesses. Not selling hard goods or storing products. Revenue sources will be affiliate marketing and downloadable products (exercise programs, eBooks etc.)
I was advised to incorporate offshore since I technically don’t have a business “presence” in a specific location. The main reason is for liability protection.
If I incorporate offshore but I remain a “resident” of Canada, am I taxed on only my personal income (salary i pay myself) as the corporation is viewed as a seperate entity? Locally based businesses are required to pay corporation taxes but Canada has no jurisdiction in those offshore locations (Nevis, Panama, Cayman Islands).
Note: I don’t plan on maintaining my Canadian “residency” for long as I will be travelling all over the world with no sure plan to return. I have no ties here (real estate, kids, wife, businesses etc.)
Any information would be great.
Thanks in advance.
Whie you are a Canadian resident, the CRA may try to look into your “tax avoidance” arrangement:
- whether the marketing and downloadable products were created in canada and if so, whether fair mkt value has been paid by the tax haven company
- “mind & management”: whether you in fact has mind and management of that offshore company, which may cause that company to be a cdn company
- “agency relationship” – whether that offshore company is a your agent in business, and thus all its revenue belongs to you.
- “sham doctrine” – whether the offshore company is in name only, and that you are the mastermind and person running the business especially when there is no employee in that offshore company, .
See the supreme court decision of the Dominion Bridge case in 1976, and the Spur Oil decision in 1981. See also the Fraser decision of 1966 when a real estate developer sold a property thru a newly incorporated company was considered to have sold the property by himself and the corporation profit should be reported by himself instead.
The Canada Revenue Agency may consider applying seciton 245 “General Anti Avoidance Rule” to your arrangement. Therefore, seek professional tax advice and proceed with caution.
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