• This is a political forum that is non-biased/non-partisan and treats every person's position on topics equally. This debate forum is not aligned to any political party. In today's politics, many ideas are split between and even within all the political parties. Often we find ourselves agreeing on one platform but some topics break our mold. We are here to discuss them in a civil political debate. If this is your first visit to our political forums, be sure to check out the RULES. Registering for debate politics is necessary before posting. Register today to participate - it's free!

How big does a Cayman Island Corporation have to be for US tax purposes?

How big does a Cayman Island Corporation have to be for US tax purposes?

  • One employee in a little office.

    Votes: 1 100.0%

  • A real functioning place that does something, e.g. processing orders or some paperwork.

    Votes: 0 0.0%

  • Something bigger. Describe.

    Votes: 0 0.0%
  • Total voters
    1
  • Poll closed .
O

OhIsee.Then

DP Veteran
Joined
Feb 14, 2011
Messages
1,581
Reaction score
277
Location
MI and AZ
Gender
Male
Political Leaning
Other
How big does a Cayman Island Corporation have to be for US tax purposes?
  1. One employee in a little office.
  2. A real functioning place that does something. Could be as little as processing orders or some paperwork.
  3. Something bigger. Describe.
 
I chose One Employee in a little office, that has always been my plan if I was ever to start a company.
 
OhIsee.Then said:
How big does a Cayman Island Corporation have to be for US tax purposes?
  1. One employee in a little office.
  2. A real functioning place that does something. Could be as little as processing orders or some paperwork.
  3. Something bigger. Describe.
Click to expand...
What do you mean by for US tax purposes?

.
 
TOJ said:
What do you mean by for US tax purposes?

.
Click to expand...
So it qualifies as a foreign corporation according to US tax law. And, so it qualifies as a Cayman Island corporation according to Cayman law.
 
OhIsee.Then said:
So it qualifies as a foreign corporation according to US tax law. And, so it qualifies as a Cayman Island corporation according to Cayman law.
Click to expand...
Why should the USA have any say in determining the requirements for a valid company in other countries?

We sell our products to a USA based company that distributes them in the USA. That company operates at close to break even so pays very little, if any, income tax. ;)

.
 
TOJ said:
Why should the USA have any say in determining the requirements for a valid company in other countries?

We sell our products to a USA based company that distributes them in the USA. That company operates at close to break even so pays very little, if any, income tax. ;)

.
Click to expand...

Not making a profit, not for sure that is going to catch on as a tax evasion scheme.

I think, not for sure, but I think what he is asking is your opinion on what the US government should recognize. For example if the "company" licensed in the Caymans only has an office and one employee but does a large amount of business through it's US devision, should the US government be going after them for Tax Evasion? Since basically, the company isn't real there.

I don't know how many actually use that scheme, but frankly I like it. It allows a company to only be taxed on profits earned in the US instead of total profits as I understand it. Maybe a tax lawyer or corporate lawyer can give you more information.
 
TOJ said:
Why should the USA have any say in determining the requirements for a valid company in other countries? .
Click to expand...
Apparently it does. It's in our tax law. But the "WHY ..." question looks like it could be another poll.
TOJ said:
We sell our products to a USA based company that distributes them in the USA. That company operates at close to break even so pays very little, if any, income tax. ;)
.
Click to expand...
That sounds like a way to move the profits to a place where the taxes are lower or zero. Is it?
 
Last edited:
TOJ said:
Why should the USA have any say in determining the requirements for a valid company in other countries? ....
Click to expand...
I might not have understood. The US doesn't " have any say in determining the requirements for a valid company in other countries"; it just has a say, and the obvious right to say, what the US will recognize as a valid company anywhere. For example in a US income tax ststement.
 
OhIsee.Then said:
Apparently it does. It's in our tax law. But the "WHY ..." question lokks like it could be another poll.
That sounds like a way to move the profits to a place where the taxes are lower or zero. Is it?
Click to expand...

If the same parent company owned both, then yes. But if one company sells to another and the second one just don't make much profit, then no. If you are breaking even, you don't pay much tax, but there is no profit to be moved either.
 
DVSentinel said:
If the same parent company owned both, then yes. But if one company sells to another and the second one just don't make much profit, then no. If you are breaking even, you don't pay much tax, but there is no profit to be moved either.
Click to expand...
But, what if the company that creates, e.g. manufactures, the product sells it to a Cayman Island division that invests in the product. Then the Cayman Island division marks it up just the right amount and sells it to the US division of the company. Then the US division sells it for the highest price it can making just a small profit. So then the Cayman Island makes almost all the profit. Anyway, how big would that Cayman Island division have to be if that was happening in the example you were giving us? Note, again the divisions are completly seperate companies by law, they just are owned by the same people at the top.
 
OhIsee.Then said:
But, what if the company that creates, e.g. manufactures, the product sells it to a Cayman Island division that invests in the product. Then the Cayman Island division marks it up just the right amount and sells it to the US division of the company. Then the US division sells it for the highest price it can making just a small profit. So then the Cayman Island makes almost all the profit. Anyway, how big would that Cayman Island division have to be if that was happening in the example you were giving us? Note, again the divisions are completly seperate companies by law, they just are owned by the same people at the top.
Click to expand...

That is a question of law, you would have to take that up with a tax lawyer or corporate lawyer. Taking Legal advice from someone posting on the Internet is a bad idea.
 
DVSentinel said:
That is a question of law, you would have to take that up with a tax lawyer or corporate lawyer. Taking Legal advice from someone posting on the Internet is a bad idea.
Click to expand...
I'm not asking for your advice. It's just a poll on peoples understanding of Cayman corperations and US tax law. What is your understanding?
 
DVSentinel said:
Not making a profit, not for sure that is going to catch on as a tax evasion scheme.
Click to expand...
You might be surprised. If the USA company is employee owned and pays their owner/employees very well it can operate at breakeven and the owners can be very happy with the situation. They pay tax as individuals but the company itself pays little to no tax.

think, not for sure, but I think what he is asking is your opinion on what the US government should recognize. For example if the "company" licensed in the Caymans only has an office and one employee but does a large amount of business through it's US devision, should the US government be going after them for Tax Evasion? Since basically, the company isn't real there.
Click to expand...
How is it not real? You don't need any employees based there to establish a real company. Employees can be located anywhere. There are many administrave companies in these kinds of locations who's business is to provide a valid address and take care of the local requirements.

In our case, the USA based distributor takes possession of the product outside the USA. We have no USA income and therefore are not obligated to file USA taxes. ;)

I don't know how many actually use that scheme, but frankly I like it. It allows a company to only be taxed on profits earned in the US instead of total profits as I understand it. Maybe a tax lawyer or corporate lawyer can give you more information.
Click to expand...
A lot of companies similar to ours use these techniques. Its pretty straight forward if the company has the right structure.

.
 
TOJ said:
You might be surprised. If the USA company is employee owned and pays their owner/employees very well it can operate at breakeven and the owners can be very happy with the situation. They pay tax as individuals but the company itself pays little to no tax.

How is it not real? You don't need any employees based there to establish a real company. Employees can be located anywhere. There are many administrave companies in these kinds of locations who's business is to provide a valid address and take care of the local requirements.

In our case, the USA based distributor takes possession of the product outside the USA. We have no USA income and therefore are not obligated to file USA taxes. ;)

A lot of companies similar to ours use these techniques. Its pretty straight forward if the company has the right structure.

.
Click to expand...

Ok, I will keep that in mind, where is the best place to do it?
 
TOJ said:
Best place? Depends on you needs. Why do you ask?

.
Click to expand...

Because I have quite a few ideas in my head for products. If I ever actually get them working, there is a potential for me to actually own a company. I really don't like the current tax setup in the US and definitely don't like the current government stance towards business and profits. So my idea was to get it started, then sell it off to a "holding" company overseas. I own that holding company but since I am not that concerned with money, I would use it to distribute the profits into holdings in other companies. Basically, create a new holding company for each investment, keeping them isolated from each other so the failure of one does not take down the other. By keeping them in a secure overseas environment that is tax friendly, and not paying dividends on the holding companies shares, I should be able to bypass any additional losses to capital gains, only corporate taxes from the "held" companies are forfeit, not another tax when those profits are sent back to investors (me) since the held companies would also be registered off shore. Also if I expand internationally, my companies only get taxed by the US on those holding/profits generated in the US. This should also protect those holdings/companies from any abuse or misuse of Dodd-Frank.
 
DVSentinel said:
Because I have quite a few ideas in my head for products. If I ever actually get them working, there is a potential for me to actually own a company. I really don't like the current tax setup in the US and definitely don't like the current government stance towards business and profits. So my idea was to get it started, then sell it off to a "holding" company overseas. I own that holding company but since I am not that concerned with money, I would use it to distribute the profits into holdings in other companies. Basically, create a new holding company for each investment, keeping them isolated from each other so the failure of one does not take down the other. By keeping them in a secure overseas environment that is tax friendly, and not paying dividends on the holding companies shares, I should be able to bypass any additional losses to capital gains, only corporate taxes from the "held" companies are forfeit, not another tax when those profits are sent back to investors (me) since the held companies would also be registered off shore. Also if I expand internationally, my companies only get taxed by the US on those holding/profits generated in the US. This should also protect those holdings/companies from any abuse or misuse of Dodd-Frank.
Click to expand...
I suggest you do some preliminary research then retain a law firm that specializes in off-shoring. If you are a USA citizen, you may want to consider renouncing.

.
 
You must log in or register to reply here.
Back
Top Bottom