Want to
Really "Escape"? - Start Your Own Tax Free Small Business - Page Two
by John Schroder
Start Your
Own Tax Free Business - Page 2
Everyone has
a different opinion about why they like (or maybe do not like) the
Internet. In my opinion, it is really one of the greatest resources
or at least one of the most practical things ever invented. Let's face
it. You can communicate with anyone in the world instantly for pennies.
You can find information on a number of topics or subjects. And you can
shop for just about anything from your living room, bedroom, or where-ever
you have your computer. The most important benefit however for the small
business owner however, is the tax benefit that can be obtained from a
business that is set up properly using the Internet as their "store".
In truth,
this idea is really nothing new and in fact comes from the mail order industry.
Let us start off by illustrating this with a hypothetical example. You
live in Jasper, Wyoming and you want to purchase a cute and cuddly stuffed
Koala bear from the Australian Company "Cuddly Koalas". So, you
see an ad in their catalog, and you call up to place your order. The company
takes your order over the telephone and then promptly ships your purchase
via UPS from the factory in Melbourne, Australia. Let us say that there
is no sales tax charged in Australia on mail order or catalog sales, so
no sales tax is added on your total purchase price. You might pay shipping
and handling costs, but certainly no sales tax.
We know that
the company in Australia has to pay tax to the Australian government,
because that is where the company is located. In fact, corporate
income taxes are very high in Australia, and the company is already paying
up to 60% in tax on profits.
What do you
think they have to say when the American tax authority (the "IRS")
says, "Listen guys, you need to pay income tax to the American government
on any sales you make to US citizens"?
I can guarantee
they would like to tell the IRS exactly what they may "put on the barbie",
and it isn't shrimp. If such a company was forced to pay corporate income
tax to every country in the world where they have a customer not only would
they go broke from the taxes but the accounting costs alone would put them
out of business. Plus how could you prove it? More importantly, how can
you enforce it?
There are a
number of litmus tests that governments use for determining tax assessment
on company sales. The idea of "point of sale" is one, and
other of course is the physical location of the company. But suppose
the company was Internet based or virtual? Many mail order companies
have in fact chosen to "go virtual" or to place their catalogs on
line. The IRS tried to pull a fast one by stating "all Internet
based commerce has a US government tax liability" because in theory
all Internet traffic goes through US telephone lines at one point or another.
Oh really?
Imagine what a German company had to say about that, considering their
web page is in German and they don't even have any US based customers.
I now believe President Clinton when he says he did not inhale. He couldn't
have, because he obviously had given all of his "stash" to the IRS
to smoke. Needless to say, they have since recounted their "statement".
Let us review
some other ideas and problems that the tax authorities have.Where does
a telephone order take place? The living room where the customer is
calling from, or on the other end of the phone, at the company?
Does this mean that every company in the world must pay corporate income
tax on profits to "Uncle Sam" simply because they use the telephone
(and there is a possibility that a telephone call can be ""switched" through
the US)? What about an order placed over the Internet?
If the previously mentioned statement by the IRS is not "applicable",
than what is? Is it a factor of where your web site is located, or
your server? Is it a factor of where your orders are processed?
Is it a factor of how you accept payment? Now that you see the problem
for the tax authorities, you hopefully can also see the benefit for you.
The Internet
offers the small businessman a possibility of using the current tax
codes, offshore banking, and "cyberspace" all to his advantage.
Let us then address all of these concerns, and also discuss how you can
set up a tax-free Internet business. First and foremost, let us set up
our business in a jurisdiction that does not tax us on profits or earnings
achieved outside that particular jurisdiction. The Bahamas and Panama
are two such places.
In order
to have a company that is completely 100% free from local taxation
for our business, we have to not earn our income from sales made to residents
of that country. So, in the case of Panama, we eliminate about 2 Million
potential taxable sales, in order to gain 8 Billion tax-free sales.
How many
people live in the Bahamas or Belize? Pick a number, same scenario.
Either way, I can live with that.
If it is going
to be said that the location of our web site or server is a factor, let
us then host our web page or server in a location that could either care
less, or offers a tax-free status by law. Placing your web site on a server
located in one of the tax free zones in the Dominican Republic would
be one idea. If the argument is that you may have a tax liability based
upon where your "office" is located, then place your office inside
one of the tax-free zones as well.
Let us also
process all of our customer payments "offshore" using a quality
merchant account provider, so no local banking is involved with regards
to our Visa and MasterCard payments. In addition, we should also set up
an offshore bank account for our business. This should be done in a jurisdiction
that allows us to earn interest on our accounts, also 100% tax-free.
Does all
of this sound too good to be true? Well, perhaps it does, but
it is a reality for a number of small business owners right now - today.
I am not responsible for writing the tax codes and you are not responsible
for writing the tax codes. As such, we can only set up our business affairs
in such a way that we gain maximum benefit based on "their" rules.
In addition, you have a business that can be "operated" from anywhere,
allowing you to serve your customers and live anywhere in the world at
the same time. As God said to Noah, here is some lumber and a hammer -
now go out there and build yourself a boat.
For more
information about setting up an offshore company and an offshore merchant
account for your business, please contact
John Schroder - Ascot Advisory
Services.
John Schroder
has over 15 years experience on Wall Street and currently provides assistance
regarding Investment information for the Dominican Republic including Residency,
Passports, Real Estate, Apartment Referrals, and Company Representation.
He lives in the Dominican Republic - To contact John go to
our
On-Line contact form -Click
Here- Or visit John's website: Ascot Advisory Services Tel. 809-334-5387
or 809-293-9427
Email:
info@ascotadvisory.com
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Visit our
web-Site: http://www.ascotadvisory.com
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