CSL's are taxed at 1.5% in Seychelles as a local domiciled company. Double taxation treaties provide the legal framework for tax treatment. Tax evasion is a crime... structuring your businesses to minimize taxes is not. Your should consider not being an employee but rather a trustee. Specifically a Liquidating Trustee. Liquidating Trusts and trustees are treated much differently... Trust and Trustee's act expressly excludes and relieve liquidating trusts and trustees from fiduciary duties. There are whole companies and divisions of very large companies which continue to operate for 20+ years in "Liquidation" mode via liquidating trust instruments. Failing divisions and subsidiaries are transfered to "Liquidating" trusts and continue to contribute to the holding company while shielding it from liabilities. This is typical for large class action settlements which require payouts over many years. ie. Exxon Valdez... Arthur Anderson & Company were experts in this area and they themselves were a Bermuda Corp. when their shit hit the fan. Tax free offshore companies are shams... Foreign Corporations that are properly registered and paying taxes... Only rely on a legal opinion from your lawyer and accountant. This post was simply to contribute ideas and not advise.
The way I understand double taxation treaties in the US, is that US citizens are allowed to use foreign income tax as a tax credit like a standard deduction to the amount of the tax, but not as a one cancels all. Please correct me if I'm wrong. Also, I didn't see the US listed on the Seychelles list of current treaty holders. Besides that though, I'm not sure if you were saying the trustee route would be used for the CSL, or if you were speaking in general about trustee's (foreign or domestic). In either case, if you were the primariy shareholder and trustee, I'm not sure how that would work. Regardless of that fact though, how would the CSL get around the requirement to report a CFC? The first links you provided to fincen.gov only show that transactions will potentially not be flagged, but not absolving a taxpayer's requirment to report international controlled holdings. Trust me, I'd be very interested in knowing how to do this legally, so not bashing here. As of yet though, I don't see a way to structure these types of setups without hitting a snag somewhere. The only legal exception being manager of a non-CFC non-US hedge fund where management/performance fees are deferred. Would love to learn more though if there are other options...
To the OP: It is possible to trade and pay no taxes to anyone. The 'how' is uncomfortable, however. Matters of location and security may be traded for tax-free trading, but doing so is complicated by design. For more, ask a tax attorney specializing in offshore assets. Should cost you about $500 per hour for specifics. It can be done. It is being done. But you won't be sitting at home in the USA.
If you are a Yank, you are taxed at US rates anywhere in the World you live, unless you are taxed some place else. I've tried avoiding taxes, and the best I've found is to setup in the USVI, where you actually pay the USVI instead of the USA. They have some biz rules where you only pay 10%, but its a hassle and expensive to set up. There are hedge funds operating there for this reason however. A US owned fund, based anywhere else, pays to the USA.
Do you know if it is possible to setup a legal entity, office, etc. in the USVI and access that location by remote network, to effectively run the USVI-based firm from anywhere on earth?
These types of structures are not typically setup to individuals directly but to business entities and trust entities with their own EIN. In the US... trustee and corporate directors, controlling shareholders are held to fiduciary duties. Under Uniform Trust and Trustees Act, Liquidating Trusts and Trustees are expressly exempt... These ficticous entities are actually provided more favorable tax treatment than real people. Take Seychelles out of the equation for a second and consider this a Japanese company such as Mitsubishi or a joint venture with an Indian or Chinese company... any "legitimate" foreign business that is domiciled abroad registered to conduct business in the US. Operating costs and expenses in the US are deducted in the US and vice versa. Intra company transactions typically are free of transfer taxes, duties etc. tax codes allow for customary expenses and repatriating of profits. You must operate and conform with the laws of the regions where you are doing business... Sales tax, business insurance, payroll etc. Seychelles in particular boomed in the late 90's early 2K specifically because it enacted very progressive laws for internet based business. The US had little case law and were relying on commerce laws from the 30's. Online transactions were a legal mystery... and a crap shoot in court. ie. VOIP violated telecom tax laws only in MN. If you recall their was a period of time online gambling / porn / cigarettes and pharmacy ops were openly transacted online. Seychelles was the #1 location to setup these businesses. DOJ / Feds / FinCENS etc.. got really tough. under the patriot act and basically extorted information exchange from everyone.. your swiss banker sold you out.. your caymen banker sold you out... IRS declared the tax free off shore corps as shams... If you don't pay taxes here or there... Developed some set of tests they use for enforcement. CSL's were developed as a tax paying entity. My knowledge is limited to Tech operations and not trading. I am aware that foreign IB's are largely unregulated as long as they are not seeking investments or funds from individual US citizens. US Business investments to foreign business are opportunity ventures and treated much different. No matter what you do if you are on the radar you will be scrutinized and challenged... Jurisdiction to your favor. Seek a written legal opinion... You can rely on such advise and move forward with your trading venture. In the event it is deemed to be a sham... You have someone to sue. CYA and keep a low profile and make sure to stay off the radar.
Are you talking about USVI exempt companies or maybe FSC's? As far as I understand, normal USVI corps get taxed that 10%, but in addition to graduated federal bringing the max total to around 38%.
Thanks, that's interesting. I'm not sure this would work for a trader setup, but it does sound like it could be useful in some circumstances. The big problem with more arcane setups for trading related businesses is it has to make sense from a business point of view as well. If it looks like a fish... the IRS will always assume it is. Gets back to be being under radar.
guys, george soros compounds his wealth tax free. dont believe the IRS scare tatics. there are LEGAL ways to avoid the CFC garbage