I found myself fascinated by the New York Time’s article on intelligent robots replacing the Chinese factory worker. As the World changes, Congress insists on keeping international tax laws written for a 1930 economy.
These ancient U.S. tax laws provide unique for international e-commerce tax planning. Some small businesses place their intelligent cloud computer server in tax-free states such as Nevada. Others go into tax-free countries such as Canada, Cyprus (an IRS beloved low tax haven country) or the Isle of Man.
A small business using a smart website merely place their computer server in a foreign location. Web sites that provide a service are perfect for international tax planning. The newest service is manufacturing products on a 3D printer.
So, how do you save taxes offshore? And what is the best type of global cloud computer tax planning? Many tax planning methods are available.
This blog will discuss one strategy on the many. If you need to up the quality of your tax planning, then contact me, Brian Dooley, CPA, MBT, at [email protected]
Canada and the Isle of Man are my two favorite tax havens for the web based business. You might be wondering about Canada. Just how do you save taxes in a high tax country? Canada does not see a computer server as a Canadian business.
The USA has complex controlled foreign corporation rules. Written in the 1960’s, they are from an ancient time. These laws do not relate to today’s internet E-commerce and robotics businesses. They allow big international tax savings if you use technology.
For example, the robots in the N.Y. Times article could be located in the Isle of Man (a British tax haven in the North Irish Sea). The Isle of Man is part of the U.K. electrical system. It has great ports for shipping. It is freezing. But I do not think a robot would complain.
Just how do your save taxes offshore? The basic steps are:
1. Create an Isle of Man corporation. This will be a “controlled foreign corporation” for U.S. tax law.
2. The Isle of Man company owns your computer server.
3. The Isle of Man company hosts your website. This website provides services or products.
4. The Isle of Man corporation accepts credit cards for its services.
5. Management and banking can take place in the USA. These two items do not affect U.S. taxation.
6. Always get an IRS private letter ruling guaranteeing your tax savings.