There was once a time when Swiss bankers would pull up to your house in a Mercedes and take a bag of money you made from your company, get in a jet, fly back to Switzerland, and deposit your money in a numbered bank account.
Things have changed a lot in the last 20 years, with the likes of the Panama Papers, the tax haven blacklist, and the worldwide Foreign Account Tax Compliance Act (FATCA).
Everyone from the US government to the OECD is concerned about the so-called dangers of banking privacy.
Since the world of offshoring has changed, you must be keenly aware of the various implications of your decisions when setting up your company abroad.
So, let’s go through those considerations for both online and offline businesses.
What is the purpose of the company? Ask yourself: Am I actively doing business? Am I holding trademarks? Am I holding intellectual property? Am I holding real estate? Am I buying and selling real estate? etc. The answer to each of these questions will impact your holistic tax strategy.
So, depending on your citizenship and your residency, these offshore companies may or may not help you to the extent you think.
Nomad Capitalist is the market leader in offshore services, bar none, whether you want a second passport or citizenship by investment.
It’s impossible to cover everyone’s tax or citizenship issues in one article, and we don’t offer one-size-fits-all solutions. If you’d like help figuring out how to take your business offshore, contact us today about becoming a client.
What do you need?
More specifically, what kind of bank account do you need? Are you doing lots of transfers? Do you need low-cost banking? Do you need fast banking? Do you need to be able to send money anywhere within 24 hours? What do you need? Your decision will vary based on your answers to this question as well.
Do you need to collect money?
Do you need to collect money from people other than through bank transfers? What payment methods will you use to collect money from clients, colleagues, or others?
Some jurisdictions will be better for e-commerce than others, so this is another point you’ll need to consider. These are just a few examples of what you must contemplate before starting. At Nomad Capitalist, we take all the complexities off your individual circumstances.
Business Considerations
So, what about the type of business you’re running? Mostly, there isn’t much of a difference between an online and offline business. You can make most businesses location-independent these days.
If you run an e-commerce business, they only want to pay you in certain countries. To solve those issues, you have to use online payment systems using different currencies; that’s when things can get confusing.
Establishing your company in the right location and the correct manner is vital, as it can save you time, money, and problems in the long run. If you follow the necessary procedures, having a business in Belize is completely legal.
However, depending on your citizenship and the country where you want to establish your business, you may be required to disclose that you have an offshore company.
An offshore company in a business-friendly location with lower corporate taxes can greatly enhance your company’s growth potential.
In November 2019, the European Union removed Belize from its tax haven blacklist, as the Central American country had implemented the necessary reforms to improve its tax regime for international business companies.
Even so, we would avoid running an active business in Belize and suggest considering a different jurisdiction.
Professionals in this field have reached out to us seeking advice on dealing with the changing offshore world. If opening an account for an offshore company in general becomes challenging, it’s even more difficult for Belize.
One reason for this difficulty is the lack of proper verification procedures.
Are you looking to offshore to simplify your life? The idea of less scrutiny in a place like Belize may seem appealing. However, it will actually be more complex. You will have to deal with more questions, extensive documentation, and ongoing compliance.
Belize’s lack of due diligence is seen as a negative thing in an economic climate that demands transparency.
Hesitant Banks
The other issue is banks. Many banks have refused to take Seychelles companies for the same reasons: they don’t like the risk.
This is one of those issues you used to run into when you were in school growing up, and the teacher said” “Well, I don’t know who made a mess on the floor, but none of you will fess up to it, so you’re all going to be punished.”
The US government and the OECD, among others, are increasingly cracking down on banks for money laundering investigations and all kinds of other stuff. People are very suspicious these days.
So, understandably, banks don’t want to touch companies from questionable offshore jurisdictions — even with a ten-foot pole.
The Tax Haven Blacklist
The European Union created the blacklist in 2017 to address tax avoidance facilitated by unclear or unfair tax policies. Eight jurisdictions remain on the list, while EU member states are not included, despite some engaging in suspicious tax practices.
The EU will continue monitoring Belize to ensure further improvements in its foreign source income exemption policy.
Our issue with choosing Belize and other jurisdictions like it is that, increasingly, you are going to need a more robust strategy. The days of opening a company in a tax haven to get a bank account that you don’t report and don’t file any accounting for are gone.
If you are a US citizen, it may stop working for you in the near future in many cases. It might take a little longer if you’re not a US citizen, but banks may eventually say, “We don’t want your Belize company.”
Make It Work
There are some things that a Belize company would work well for. For example, if you’re a non-US citizen and want to hold trademarks and IP, Belize might work well for you if you don’t need to send and receive money.
However, if you’re engaging in money transfers or running some sort of active business where you’re receiving payment for services or products, in this day and age, you need a much more robust strategy.
If you have a Belize company right now, there are steps that you can take to make it all work, but it really depends on the setup and your goals.
It’s better to go to other places and pay a tiny amount of tax or qualify for tax exemptions. There are other ways to pay zero tax. However, it does not mean Belize has no place in a holistic offshore strategy.
So you are likely wondering, what are the best countries for offshore companies? What is “best” may not be the same for everyone. People have different motivations and specific business, income, and lifestyle goals.
Nomad Capitalist is unique, and we offer holistic strategies that cover more than 75 countries and have extensively researched many others. Apply here to become a client.
