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website planned to be sold off shore in the future

i'm a EU citizen, living the US, planning to start a website with the goal of selling it within a couple of years. how should i structure it to avoid paying taxes on the sales profit? maybe a holding or trust in a low tax country owns the US company? should i change my domicil - where to? - when the time comes to reap the benefits? i would be grateful for any advice. thank you for much.

j. frank

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You say you are an "EU citizen" - What pray is that? The EU is a trade grouping, not a country & does not offer citizenship or issue passports. This is relevant to future treatment of gains and in particular capital gains taxes as it is national governments which tax their citizens, not the EU... and some tax their citizens long after they have departed.

Assuming you are a citizen of a country that does not seek to tax it's nationals after they cease to be resident, it is only the IRS in the USA you need to consider.

If you are still resident in the USA at the time you make a sale of the company's shares, then that gain is taxable in the USA ... assuming you declare it. There are some countries (including several in the Caribbean which do not tax capital gains (or indeed income) at all and the strictly legal way to enjoy you gains tax free would be to relocate to such a jurisdiction BEFORE you sell.

Alternatively, establish your company in a low tax jurisdiction (eg Hong Kong or Singapore), use nominees to obscure your ownership of the company and shortly before sale, establish a second company in a tax free country (eg BVI, Belize etc.) into which to pay the sale proceeds.

To summarise, contrary to much you might read, the ONLY legal ways to avoid capital gains tax (or its equivalent) is to (a) base yourself somewhere where such taxes are not levied OR (b) (more riskily) to hide the gain from your local tax office.

Hope this helps

www.pevex-offshore.com
James

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I presume you are a citizen of an EU Member State. Most of those do not tax non-residents (although many try to retain you as a resident if you are not careful to separate yourself and merely moving to the US may not make you a non-resident.

As long as you hold a residence card (VISA) in the US you are obligated to report all of the income you receive wherever it is earned. You must file with your state tax authority and with the IRS.

Creating the company outside of the US while you are still a US taxpayer generally does not work as the IRS has a "Controlled Foreign Corporation" rule that would require that you report the offshore income. This would also generally apply to trusts.

HOWEVER, that being said you may benefit from creating the entity outside of the US and avoiding the capital gain (in the US) if you move prior to entering into the sale. You would need to do this before you started negotiations however to be on the safe-side.

AND, if you do this be sure to disclose any bank accounts over which you have control and are the beneficial owner.

Good luck.
Paul Keating
Paul@law.es
Paul Keating