Tax Strategy | Establish a Foreign Company
For Australian residents who wish to conduct a trading or investing business overseas, this strategy involves incorporating a company overseas. Typically, the overseas company will be incorporated in a country with lower tax rates than Australia, and have foreign directors. If the foreign incorporated company ensures its Central Management & Control (CM&C) is overseas (and not in Australia), then the company profits will not be taxable in Australia.
For the CM&C of a foreign incorporated company not to be deemed to be in Australia requires:
- Foreign directors who actually make strategic company decisions, and don’t just rubber stamp shareholders decisions.
- That the foreign directors have the relevant skills, education & experience to make the strategic company decisions.
- All directors’ meetings and decisions taken are minuted.
- All directors’ meetings are held overseas.
- Foreign directors are provided with timely and relevant information so they are kept up to date with company developments.
- Directors meetings are held frequently.
In addition, with this strategy you also need to consider Australia’s CFC (controlled foreign corporation) and transfer pricing rules.
"You’d be stupid not to try to cut your tax bill and those that don’t are stupid in business"
- Bono: U2