For most entrepreneurs, such an operation as the withdrawal of assets from an offshore, is inevitably followed by the payment of taxes. In reality, things are much more optimistic. Today, the procedure for withdrawing assets from a foreign company gives the owner access to two benefits at once.
The first benefit relates to the withdrawal by the owner of the assets from the liquidated offshore company. Provided that the assets (representing property law) are transferred to this beneficiary, you will not have to pay a tax on the withdrawal of funds to the recipient of the assets. The exemption does not apply to cash withdrawal operations. Funds withdrawn from an offshore in this way are taxed at a rate of 13%, and, in some cases, 20%.
The second perk are the conditions for the subsequent sale of the withdrawn property. In such transactions, the company's expenses are regarded by the owner as personal. The tax on the sale of assets will only have to be paid if the price of an asset on the market exceeds the price at which the asset was acquired by an offshore company.
Example: A person who owns a large manufacturing company in Poland is also the owner of a company in Cyprus. A Cypriot company provides a loan to the Polish company in the amount of 33 000 00 Polish zlotys for the construction of production facilities of a subsidiary owned by the same beneficiary.
A year before that, the owner decides to liquidate the foreign company and fulfills this intention by preparing the necessary financial statements and documents confirming the existence of loan obligations between the Polish company and the Cypriot one. The owner submits a personal income tax return, where he declares the newly acquired loan rights transferred to him from an offshore company. From this moment, all rights under a debt of 33 000 00 Polish zlotys are transferred to the owner. The Polish company, in turn, makes payments on the loan personally to the beneficiary. Such a loan will not be taxed.
You have to pay tax for money
Yes, the exemption does not apply to cash, but the money is easily replaced by foreign currency bonds and gold, turning into property fully subject to preferential treatment. Sometimes, to obtain benefits, a property is purchased. Loan issuance schemes are also used, followed by transfer of debt rights to the owner. A person owning enterprises in their country or abroad, with the help of a foreign company, carries out a loan to a domestic company, after which he liquidates the offshore, becoming a recipient of loan payments. An example of this scheme is described in detail above.
In this algorithm, loan payments received by the beneficiary are included in the declaration as income, but are not taxed. Of course, in the variations in the use of benefits there are also unsteady moments that require detailed consideration.
The first thing you should pay attention to when implementing any of the above strategies is the history of operations performed by the offshore. What is worth taking care of? The preparing a favorable ground for the liquidation of the company and the withdrawal of assets. Important stages of such preparation are the analysis of the financial history of the company and the definition of an action plan that allows to eliminate or minimize possible risks.
The second undesirable moment that can be encountered in the liquidation process is the likelihood of information leakage. That’s why you should first check the international ranking on the protection of property rights and your country’s place in it.
Moreover, the submission of a personal income tax return indicating large income leads to an immediate audit of tax authorities.
You won’t be able to hide
Whatever decision was made by the beneficiary on the subject of a foreign company, it should be supported by thorough analytical analysis. For those who intend to act "transparently", the liquidation of the offshore with the accompanying declaration of income of the organization will be the best solution.
Regardless of which path the owner of the company has chosen, one should not forget the most important business postulates: the strategy for upcoming actions should consider all possible options for the development of events, include estimates, timelines, economic benefits, include risks, should be carefully thought out and evaluated .
The principle “be prepared for the worst, expect the best” is appropriate here.
