Achieving financial sovereignty by specialist tax planning using global tax competition …
In 1995, two man, Davidson and Rees Moggs, wrote a book “The Sovereign Individual” where they predicted the COLLAPSE of the nation State.
They foretold the rise of the digital economy and the internet, and how it would widen the access of information for businesses and consumers … ending the high tax bullying practices of western governments as people utilised global tax competition and immersed themselves in the digital economy.
We haven’t seen a complete end yet. But we’re seeing the signs.
People are becoming educated and are fed up with the amount of taxes they’re paying in western countries, especially when hearing about multinationals and high net worth individuals paying less than 1% tax. All 100% legal.
Take these figures for instance …
- Apple earned $27 billion, paid $193 million tax (less than 1%), using their Luxemburgh entity
- Starbucks made 3 billion GBP and paid 8.6 billion GBP in tax (0.25%) using Luxemburgh and Netherlands
- Amazon made $5.3 billion in sales but only paid $11.9 million in tax (0.2%) thanks to Luxemburgh (& paid $2.4 million tax on $4 billion profits in 2013)
- Google paid less than 0.2% tax ($11.9 million) on $2 billion of Google adwords revenue made in Australia through Singapore, and using Bermuda and Ireland for brand ownership.
- Facebook paid 4,327 GBP (you heard right) in tax in 2015 in UK. In fact, since 2012, Facebook have paid ZERO TAX in America.
- Ebay paid $555,000 in tax in Australia and NZ by ensuring it’s Australian company was owned by Switzerland and Netherlands. Of it’s $300 million sales in Australia, $260 million was attributed to Switzerland, and they’ve paid LEGALLY $6.2 million in tax over 12 years.
- Paypal sends 86% of its revenue to a Singapore company ($1 billion out of $1.2 billion 2014) for “services under an agreement related to its online payments processing business”. In 2014 accounts showed a 1% profit margin in Australia and 15% in the USA.
At the Senate enquiry in late 2015, Uber taxis were grilled on their billing and tax practices.
Uber are smart operators. When you catch an Uber taxi and get billed from your phone app, you are billed by a company in Netherlands (let’s call it Uber Netherlands No. 1). The drivers get paid also from the Netherlands (let’s call it Uber Netherlands No. 2). Each country has a local company to manage their obligations, eg. Uber Australia, Uber USA, etc. This pays minimal tax. Because of the rules governing Netherlands foreign sourced income and through specialist tax planning, Uber pays no tax in Netherlands, all 100% legal.
The Senate inquiry was asked what can be done about it, and the response was “not much”.
This is a perfect example of what specialist tax planning can do.
CONTRAST the average high income earner with a job or business income trying to get by …
Using a figure of $400,000 annual income, in 2013, Price Waterhouse Coopers did an analysis of the different countries and how much income tax you’d pay.
The findings were frightening.
Here they are in terms of % you actually take home …
- Italy 50.5% (takes home $202,360 of $400,000 wage)
- India 53%
- UK 57%
- France 57%
- Australia 59%
- USA 60% (Federal plus New York State tax)
- Germany 61%
This doesn’t even take into account GST, sales taxes, petrol taxes, capital gains taxes, stamp duty, and all the other horrible taxes you have to pay.
It isn’t surprising some believe you will pay up to 70% of your income in taxes when everything is added up.
The conclusion is this …
Seeking to become financially free and having a job or business and paying taxes without specialist tax planning is like trying to play football while wearing a 10kg backpack on your back
In saying that, you must ALWAYS ensure everything you do is 100% legal. Don’t do stupid crazy stuff like …
- Prepackaged tax avoidance schemes
- Hiding money offshore and pretending it’s not theirs
- Not lodging tax returns or compliance paperwork because they’re angry
- Doing everything cheap on the internet and hoping it’ll be ok
- Deliberately working less to pay less taxes
All these things are a sure way of having no wealth or having that dreaded knock on the door.
There is a sense of inherent right and wrong in all of this. Deliberately or foolishly cheating on our taxes always comes unstuck. The consequences aren’t worth it. Why go to jail or spend years of stress in courts and paying fines and penalties to make a bit of money?
In the modern world anyone can start a business online and have global customers … or trade markets internationally … or hire staff in Philippines or India. By being brave and by stepping out, as well as the reward of having power over your own life and finances, you can save a small fortune in taxes by using specialist tax planning and global tax competition legally.
Keep in mind the government aren’t happy about it. As you will see in my 20 minute video (CLICK HERE), governments have over $200 trillion in debt to the international banks and are desperate to keep their revenue alive. And like all bullies, it is easier to target the small business than the multinationals who have the money and resources to stand up to bullies.
All freedom comes at a price and with responsibility.
Who can minimise tax by using specialist tax planning?
Within Australia, UK, US, if you run a business or invest, there is a lot you can do, using companies, trusts and other structures.
On an international level and utilising global tax competition, you can minimise tax using specialist tax planning if …
- You run a business in your home country (eg. Australia) which is already international or you’re expanding internationally
- You trade markets internationally and have a legitimate global office
- You are willing to move overseas to a lower tax country
You cannot do it if …
- You have a day job in your home country only
- You have a business which only has clients in your home country
- You are investing overseas but not running a business
- You are buying property or shares in your home country
If you aren’t doing any of that, you can’t do it. Simple.
It works this way because of how the controlled foreign company (CFC) and transferor trust rules work across western countries.
Not a CFC
If you have an overseas company and you or other residents of your country (eg. Australia) own less than 40% of it, it is NOT a CFC meaning income is not automatically taxed in your home country (eg. Australia).
So for example, if you earn business income of any form, or investment income, you only pay tax if you bring it back into your home country.
If you have an overseas company and you or other residents of your country (eg. Australia) own 40% or more of it, or fall within other tests, your income is automatically taxed in your home country (eg. Australia). This means WHETHER OR NOT you bring it back into your home country, you will be taxed unless you satisfy the active income test.
(The active income test means legitimate business income, not passive investing or inter-group tranasctions).
That’s why you want top specialist tax planning before you even think about setting up structures.
Robert Kiyosaki in Rich Dad Poor Dad states one of the four most important things to master in business is specialist tax planning.
Ultimately the best way to go is to move offshore. That is what many are now doing.
To find out more, click on Offshore Tax Planning
So … how do I find the right people to work with for specialist tax planning?
It’s never easy. There is so much information on the internet and not all of it is right.
You want someone who knows international tax laws and who understands the laws of your home country or can connect you with experts in your home country to work together as a team.
Click here to find out some tips on how to select a top international tax consultant.
Or click here to watch our 20 minute condensed video.
How Do I Get in Contact With You?
Call us on 1300 669 336.
Or click here to organise a no-obligation strategy session for specialist tax planning.
About the Author
Written by Warren Black head of the Wealth Safe international tax planning division.
Warren has over 27 years experience in tax planning and asset protection, including 10 years at the Australian Tax Office. He is the ONLY recommended international tax consultant in Australia on Lance Spicer’s list of recommended international tax experts. Lance Spicer is a highly regarded authority in offshore structuring and planning and going under the radar.
Warren knows the tricks of the trade so you only pay the tax you legally have to and you take advantage of the international tricks available to build your wealth faster.