Some key points (some general, some specific to financial traders):
- understand the difference between tax residency and domicile status.
- live somewhere with remittance based taxation and where you are NOT domiciled.
- remittance based taxation can mean that even if you wait some years, bringing that untaxed money into that country is potentially taxable even some years later. (Get advice from a good accountant)
- be aware of CFC rules (Controlled Foreign Company)
- where you do the work is usually where you will be taxed no matter the residence of your company. (as above, know how the CFC rules apply).
- trading income may not be considered capital gains if you trade regularly to generate the primary source of income.
- you will need a bank account and a brokerage account in the name of your company. (the names will need to match, Transferwise is ok for this in my experience).
- the compliance process/documentation requirements and non-trivial and its harder to get the brokerage account than the bank account
- broking compliance departments aren't very smart. Anything beyond a single company that you own outright will be hard work and no guarantee of success.
- companies based in some countries make this process harder. For major US brokerage firms, this list can even include Malta, Cyprus, UK crown depenencies. (unless its a single company structure).
- email 4-5 coporate service providers/accountancy firms then with the same set of questions, the replies will give you a feel of who you are willing to work with. Be specific about knowing ALL costs. (audit, accountancy, banking, corporate structure, etc. etc.)
Czech Republic and Malaysia have next to no CFC rules so that may be an option. Live there with a single offshore company structure.
Cyprus may well be a better solution than Malta for traders but depends on how they view the trading income. (cap gain vs income).
Malta can work but note that the corporate tax refund system (6/7ths) is based on the owership of that company being offshore but you will need local directors for companies in most countries.
None of the issues are entirely insurmountable but the general advice I see on this forum is for company setups where the customers of the company don't care where the company is legally located. If you are buying widgets, you don't care about the company ownership. For trading, the brokerage firm is your counter-party and they very much do care!
Brokerage firms have stringent KYC (Know Your Client) & AML (Anti-Money Laundering) rules and its very possible your account application will be declined unless it is completely transparent (no nominees) and even then, anything but the simplest of structures can be a challenge.
All of this assumes you want to live in the EU (or Malaysia!). I have no comment to make on other locations.
On top of all this, think about what it will be like to actually live in your chosen location.
Is language an issue? Culture? Weather? Know what is important to you! There is more to life than minimising tax.
Typically $80-100k USD p.a. is the bare minimum at which an offshore co. will make sense. Less than that and the costs will outweigh the tax saving.
If you want to take an approach of hiding or not being entirely ligit, there may be other solutions but financial work is heavily scrutinised.
Do yourself a favour, have an entirely legal structure that would stand up to an audit.
Hope it helps.
- understand the difference between tax residency and domicile status.
- live somewhere with remittance based taxation and where you are NOT domiciled.
- remittance based taxation can mean that even if you wait some years, bringing that untaxed money into that country is potentially taxable even some years later. (Get advice from a good accountant)
- be aware of CFC rules (Controlled Foreign Company)
- where you do the work is usually where you will be taxed no matter the residence of your company. (as above, know how the CFC rules apply).
- trading income may not be considered capital gains if you trade regularly to generate the primary source of income.
- you will need a bank account and a brokerage account in the name of your company. (the names will need to match, Transferwise is ok for this in my experience).
- the compliance process/documentation requirements and non-trivial and its harder to get the brokerage account than the bank account
- broking compliance departments aren't very smart. Anything beyond a single company that you own outright will be hard work and no guarantee of success.
- companies based in some countries make this process harder. For major US brokerage firms, this list can even include Malta, Cyprus, UK crown depenencies. (unless its a single company structure).
- email 4-5 coporate service providers/accountancy firms then with the same set of questions, the replies will give you a feel of who you are willing to work with. Be specific about knowing ALL costs. (audit, accountancy, banking, corporate structure, etc. etc.)
Czech Republic and Malaysia have next to no CFC rules so that may be an option. Live there with a single offshore company structure.
Cyprus may well be a better solution than Malta for traders but depends on how they view the trading income. (cap gain vs income).
Malta can work but note that the corporate tax refund system (6/7ths) is based on the owership of that company being offshore but you will need local directors for companies in most countries.
None of the issues are entirely insurmountable but the general advice I see on this forum is for company setups where the customers of the company don't care where the company is legally located. If you are buying widgets, you don't care about the company ownership. For trading, the brokerage firm is your counter-party and they very much do care!
Brokerage firms have stringent KYC (Know Your Client) & AML (Anti-Money Laundering) rules and its very possible your account application will be declined unless it is completely transparent (no nominees) and even then, anything but the simplest of structures can be a challenge.
All of this assumes you want to live in the EU (or Malaysia!). I have no comment to make on other locations.
On top of all this, think about what it will be like to actually live in your chosen location.
Is language an issue? Culture? Weather? Know what is important to you! There is more to life than minimising tax.
Typically $80-100k USD p.a. is the bare minimum at which an offshore co. will make sense. Less than that and the costs will outweigh the tax saving.
If you want to take an approach of hiding or not being entirely ligit, there may be other solutions but financial work is heavily scrutinised.
Do yourself a favour, have an entirely legal structure that would stand up to an audit.
Hope it helps.
