Should You Offshore Your Business? Tax Savings and Asset Protection!

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To quickly review the five flags model:

•  Your Country A is where you live but don’t have a passport (zero or low income and capital gains taxes).

•  Your Country B is where you have a passport but don’t live.

• Your Country C is where your business is based (zero or low  corporate tax).

•  Your Country D is where you have your investments (zero or low capital gains taxes)

•  Your Country E (which I consider optional) is where you vacation and/or buy your stuff (zero or low sales taxes or VAT).

Today we’re going to talk about your Country C. This is the country where you base your business structure, meaning your LLC, LTD, corporation, or whatever it is you’re using (or will be using if it’s a new business). Ideally, this country should not be where you live most of the year, though there can be exceptions to this. This means the business is “offshore,” i.e. not located where you live.

This is done for two primary reasons: tax savings and asset protection.

Tax savings is a significant advantage to anyone living in the Western world and even many who are not, with real tax rates in most of the civilized world at historic highs. As I’ve talked about before, you’re paying a massive percentage of your income as taxes, unless perhaps you’re already ultra-rich (centimillionaire or billionaire). But even those ultra-rich guys are paying reduced taxes because, guess what, they’re offshoring their companies.

Fortunately, you don’t have to be rich to set up a business offshore because if you do it correctly it usually doesn’t cost that much money, especially relative to how much money you or the company already makes. However, there is still a hunk of financial expense and time/effort required to do this, so you only want to do this if it makes sense. We’ll cover possible tax savings first.

Tax Savings

An offshore business can save you in taxes in two possible ways.

First, you’ll pay a dramatically reduced corporate tax. Most Western countries are going to slam you with a corporate tax that is 30-40%. This is, of course, insane.

There are several countries or territories in the world that charge 0% corporate tax, including:

•              Anguilla

•              Bahamas

•              Bahrain

•              Bermuda

•              Cayman Islands

•              Guernsey

•              Isle of Man

•              Turks and Caicos Islands

Many other countries charge meager corporate tax, often with deductions and exceptions on top of that, such as:

•              Barbados – 5.5%

•              Uzbekistan (where I’m going to visit in a few weeks) – 7.5%

•              Turkmenistan – 8%

•              Jersey – 8%

•              Montenegro – 9%-15%

•              Hungary – 9%

•              Andorra – 7-10%

With all of these options, it’s literally stupid to tolerate paying anything more than about a 10% corporate tax.

You might be thinking, “But can I, with my passport and travel ability, actually set up a company in these places?” Some you can’t, but many you can, especially if you are willing to travel there and spend a few weeks in these places setting up logistics.

The second way you can save money in taxes by offshoring is by reducing your taxes in your own country. This is a little more complicated and the exact structure varies from country to country. Essentially, if you live in your current country but you’re getting income from a foreign corporation (even if you own it) you may get a big tax break (depending on the laws in your country).

As just one example, in the USA, any US corporation that owns 100% of a foreign corporation gets a 50% deduction on all corporate taxes(!). There’s a certain structure that needs to be in place for this to happen but it’s a real law.

Also, remember that most corporate taxes only kick in after you earn a certain amount, and you pay 0% if you make under that. So if the corporate tax kicks in only at $100,000 a year (like Dubai’s new 9% corporate tax) and you make the Sovereign CEO recommended minimum of $85,000 a year, you pay 0% corporate tax because you’re under the threshold. This is also true if your company grosses $300,000 (or whatever) but you only take $95,000 as profit; you still pay zero tax.

Be aware that none of these potential tax savings affect your personal tax burden, and this is a big source of confusion. If you have an offshore corporation that charges 0% corporate tax, but then you live in a Western country more than 183 days a year that taxes you 40% on your worldwide income, you’re still going to pay that 40%.

This is why, in many collapsing Western countries, if you just offshore your business but do literally nothing else, i.e. you just stay 12 months a year in your collapsing Western country and make no other changes in your tax structure, you often won’t get any tax benefits. If you live in a country like that, you should also make some other five flags changes to your lifestyle to get your full tax benefits, but that’s a topic for another time.

You will, however, get the second benefit regardless of where you live, which is…

Asset Protection

Another fantastic benefit of offshoring your business is that it’s (usually) protected from lawsuits and the government of your home country.

If someone sues you, or if your ex-wife tries to go after your money, or if the IRS (or your non-American version) tries to garnish funds from your checking account, they (usually) can’t do any of this if your corporate bank account is sitting in a bank in Bahrain or Barbados. It’s not in their country, so likely they won’t even know that it’s there (though there’s an exception to this I’ll cover in a minute), and even if they do know it’s there, how are they going to get it?

It’s pretty nice and allows you to sleep at night.

As usual, this requires a specific process, usually with the assistance of international accountants or attorneys, to set up correctly. Also, every country’s laws are different regarding this so you need to do your homework. In many countries (including the Collapsing USA) you may be legally required to declare that you have corporate assets in other countries, so at a minimum they will know they are there. However, A) they’re still protected and B) this doesn’t apply to all international assets, just certain ones.

The bottom line is that there is no reason to just “put up” with high tax rates and a constant risk that you can lose all of your money from an overly-grabby government. You have so many other options in the world.

Question of The Week: Are Facebook Ads Still The Way To Go?

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Hey Caleb, big thanks for everything you do. I’ve kicked off an online martial arts business and I’m thinking about diving into Facebook ads to get it rolling. There’s a bunch of mixed signals out there about how effective Facebook ads are. You’ve got some folks praising them, others trashing them, and a few saying they were great once but not so much now.

Here is my question in two parts:

1. Are Facebook ads the way to go, or should I be looking at Instagram or YouTube instead?

2. If you’re on board with Facebook, can you break down the best strategy for how this would work for a new business?

Yes, I get this question a lot. Here’s why you’re getting all this conflicting information. 

Facebook ads before about 2019 or so were a huge cash cow and it was really easy to make a shitload of money doing them. Then, as what always happens to any social media cash cow, Facebook stepped in one day and, say it with me, changed the algorithm.

When this happened, I knew young guys making $40,000 a month on Facebook ads suddenly get murdered and have their incomes drop to $5,000 a month or less using the same ads. It’s a similar story to what YouTube did a few years ago to their content creator’s ad revenue (the “Adpocalypse”).

Also, Facebook started cracking down on anything politically incorrect in their ads. Today, you can’t market anything like dating advice, cannabis, get rich quick, and a lot of other things on Facebook; your ad account will be immediately shut down (unlike places like TikTok or YouTube where you can advertise pretty much anything you want).

So for a while, Facebook ads sucked for a lot of people.

But that was five years ago and things have changed. Since then, new advertisers have figured out Facebook’s rules and systems and many of them are doing great now. I have a personal friend who makes six figures a month the only marketing he does is Facebook ads. He does literally nothing else, no social media, no nothing, and he makes a lot of money.

So yes, Facebook ads work great as long as you’re not selling anything politically incorrect or controversial.

In terms of how to do it, you do it the same way you advertise anything online. Always be A/B split testing the shit out of everything, always running multiple ads and see which ones get the most clicks and (more importantly) the most sales. Always add new ads to the mix to beat your control ads. Pay attention to the numbers carefully, at least twice a week (if not every day). Make sure you understand Facebook’s rules (or hire someone to do so).

Do all of that, and you’ll do fine.

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