Before I offer you my free, flawed, and non-professional advice, perhaps I should list the advantages and disadvantages of having an offshore company first.
Advantages of Having an Offshore Company
Offshore companies offer two great advantages:
Favorable tax treatment: Little to no tax on income, dividends, profit, or capital gains so both you and your company can keep more of what you earn.
Asset and Identity protection: Offshore companies are often located in a different country than your country of residence. These jurisdictions typically do not have accounting transparency treaties or agreements with any government in the world, making it difficult for creditors or governments to find and seize your assets.
Disadvantages of Having an Offshore Company
There are always two sides to a coin, and unfortunately, offshore companies come with numerous disadvantages too:
RED FLAG alert: It does not matter what you or your company does; just having a registered offshore company or office almost guarantees an instant rejection from any well-established banks when attempting to open bank accounts. Many service providers and business counterparts will require you to answer numerous questions and provide extensive proof regarding the good standing of your business practices. Tax authorities will scrutinize you and your company meticulously, whether you declare or not.
Increased transparency from offshore jurisdictions: A growing number of offshore countries and islands are joining the global trend toward tax transparency and information exchange. Failure to report your offshore company can lead to dire consequences once caught. Instances abound where a country or island, once a tax haven, changed overnight, jeopardizing all their clients who were suddenly exposed and labeled as tax criminals. Read my full story to understand how Seychelles and its banking system left me in a lurch.
At risk of assets being frozen and incurring higher and more unwanted costs along the way: Frequently, offshore companies are compelled to collaborate with offshore banks because they’re the only ones who facilitate the opening of bank accounts, while well-established banks do not. These institutions are inherently shady and lack a stellar reputation. Unsurprisingly, they charge significantly more for their services compared to regular banks and don’t make it easy and cheap for you to even close down your accounts.
If you search for information on Europe Pacific Bank, you’ll find numerous legal updates about it. In this brief blog post, I’ll provide a concise overview of my personal experience and the broader implications.
Europe Pacific Bank was once a relatively sizable offshore bank based in Seychelles, attracting the wealthy from around the world to park their money. I maintained two corporate bank accounts with them from 2016 until 2020. From my personal experience, their services were both terrible and questionable from the start. It took me five long years to successfully close down my accounts. During that process, they disclosed my information to the Dutch tax authorities, leading to a horrendous 2.5-year investigation.
The bank further left thousands of its clients stranded when its banking services were suspended in June 2022, with accounts and assets frozen. Many clients were suddenly exposed, suspected of tax evasion, and subsequently investigated by their respective countries’ tax authorities. The UK, in particular, emerged as one of the leading countries in this campaign.
The sudden suspension of Europe Pacific Bank’s services serves as a cautionary tale about the risks associated with offshore banking. The lack of transparency and the potential for sudden regulatory actions can leave clients vulnerable. If you’re considering offshore banking, it’s crucial to weigh these risks against the potential benefits carefully.
Should You Open an Offshore Company with the Purpose of Avoiding Taxes?
After evaluating all the pros and cons above, if you’re still on the fence, immersing yourself in my book might help. Experiencing the emotional rollercoaster and the aftermath of my investigation may provide the additional information you need to decide.
While I’ve extensively covered everything in the book, allow me to highlight a few additional points.
If you have a substantial amount of money to hide and a robust legal structure around it, still proceed with caution. Ensure there are no cracks because once caught, the consequences are severe. I was once confident my structure was solid; I was careful and smart. There was no F*CKING way I would be caught, not in a million years. The hard-core evidence was that my offshore companies had been running smoothly for five years without any hiccups. That confidence crashed like an airplane the day I received the investigation letter addressing one of those companies.
After that crash of my confidence, let me share a crucial aspect that came to light during my investigation. It doesn’t matter where on earth my company is incorporated; as long as I reside in The Netherlands and manage the business from here, both my company and I are bound to pay Dutch taxes. Period. End of discussion. Unless, of course, I could prove that all strategic and daily business decisions were made by someone else outside of The Netherlands, along with my entire team. Despite having a local director, an accounting team, and an office outside of The Netherlands, my setup wasn’t solid enough. What I thought was bulletproof crumbled when put to the test.
Now, you might question my earlier mention of big crypto exchanges thriving in offshore islands without issues, or corporate giants like Google and Facebook subtly benefiting from Ireland’s tax structure. WHY CAN’T YOU DO THE SAME? What’s the difference?
Unfortunately, the key difference lies in the scale of financial resources. If you have the financial muscle of industry giants, you can easily afford top-tier legal teams to exploit loopholes across various jurisdictions to your advantage. In that case, my blog might not be the right fit for you. My blog is geared towards small to medium-sized entrepreneurs with a few hundred thousand or a few million euros or dollars to protect. These entrepreneurs are well-off but not wealthy enough to hire an entire legal team or create complex structures, yet they still seek the same tax advantages that the big players enjoy
Given my history of being caught for tax evasion, I understand if you find my advice biased. I am no longer the fearless and brave person I once was. The near-loss of my freedom has taught me the paramount importance of peace of mind and a restful night’s sleep. The enduring struggle, stress, and consequences have convinced me that I would never take such risks again—it’s simply not worth it!
***This chapter is part of a SIX-chapter series— don’t miss any part of the story! Stay updated and read more chapters from this series here:
- Introduction: Offshore Companies & Tax Evasion (6 Chapters)
- Part 1: What Is an Offshore Company? What Is Tax Evasion?
- Part 2: List Of Known Offshore Countries And Territories
- Part 3: Should You Open An Offshore Company?
- Part 4: What Is The Best Offshore Structure?
- Part 5: Where Should You Best Have Your Offshore Incorporated?
- Part 6 (Final): Words Of Caution
One Response