/biz/ - Business & Finance

two major uses:

1. you can reroute legitimate income to an offshore tax haven and bank it there without paying any income tax in the country you live in

2. you can deposit cash from illegal sources to a country with good bank privacy laws to conceal it from domestic law enforcement

The downside of use one is that there are only limited ways for you to spend the money without attracting income tax in your home country (eg land), so you will usually need to maintain a small taxable income in your home country for living expenses.

>>815442
>2. you can deposit cash from illegal sources to a country with good bank privacy laws to conceal it from domestic law enforcement
not for too long tho.

>>815442
Thanks

>>815442
>>815451

A simplistic example of scenario 1 (in real life you have to be a little sneakier than this, but this is the general idea):

You own Company A in the USA which made $100 profit this year, and you wish to avoid tax on this amount

You set up Company B in Belize, and invoice Company A $110 for "consulting services"

Company A now makes a loss, and Company B buys a $30 house in your home town, and banks the rest with no tax liability

You lease the house from Company B for $1 per year

>>815435
"Offshore" banks actually float in international waters on giant inflatable platforms

If you have an account you can visit them for holidays. If you are a really good customer they will send a helicopter to pick you up. You can spend a couple of days sitting outside the bank and enjoying the view and drinking cocktails (which are usually free to good customers), then you can go in and do your business.

Pretty convenient actually. My bank floated around the edge of the arctic circle last year. I sat with my mortgage advisor and watched the northern lights. It got a bit chilly though

>>815464

>>815457
This is textbook tax avoidance. If you're caught, expect to lose everything and be in jail for 1-2 years.

>>815469
Don't you know what a "joke" is?

>>815528
What would a more advanced method entail?

>>815542
Paying market rate rent to the company like someone who isn't a retard is a good start.

Seriously though, if you're a US citizen and have no other citizenships, you're probably fucked. US laws regarding our depositors and expatriating money are horrible.

>>815469
bah! you spotted my deception

But why is it illegal? and would it help if i were a citizen in 2 countries

>>815659
Offshore banking is not illegal. What is illegal is using offshore banking for tax evasion.

The benefits of legal offshore banking are about:

>safety for your assets, especially for people from unstable countries
>more privacy (the authorities can't spy on you as easily to see all your expenses)
>asset protection against lawsuits
>high-end service which may not exist in your home country
>avoiding capital controls (like it's happening right now in Greece: citizens can't take more than 60 euros at ATMs, they can't pay foreign companies either... but not if they have some cash, legally, on a Swiss bank account)
>not depending from unreliable local banks if you travel much around the world, or work abroad
>sometimes, much higher interest rates on deposits
>using a foreign trust for your inheritance or philanthropy, and having a bank account for it (trusts don't exist in many European countries)

Rich people's needs can be complex and offshore banking is a legitimate tool, it's not simply about reducing your tax burden (although it's often implied).

>>815457
>You set up Company B in Belize, and invoice Company A $110 for "consulting services"
This isn't avoiding tax through some sort of clever international structuring; this is just 'making up false expenses on your tax return'.
You can do exactly the same thing without creating a company in Belize. Indeed, actually having a company in Belize probably just makes it much more likely that you'll get audited.

And to the extent that the arrangement would be effective to avoid tax, it's because of the profit shifting part anyway (ie transfer pricing on the falsified consulting services), not the offshore banking part.

>>815435
Can the average person make an offshore bank account in say the Bahamas or Switzerland? How would that work?

what are index funds and how do they work?

I have citizenship in 2 countries how can this be a advantage for me

>>815435

Mojitos.

>>816088
Yes, just contact the bank, give your personal info (that's the "know your customer" procedure) and they will accept your application or not.

You often have several extra steps, such as:

1) Having to visit the bank in person (depends on the country, and can almost always be avoided if you are depositing several millions),

2) Using an introducer (may avoid you the need to visit the bank in person),

3) Depositing a sum that's more or less large (going for a few thousands dollars for Bahamas banks, to 100k-500k for a lot of Swiss banks).

I'm not convinced by a lot of Caribbean banks though: usually high fees, very slow, dubious safety.