As a business owner, how often do you find yourself buying things at the end of the year that you really don’t need because you’d rather not give your money to the taxman?
What if there was a way to virtually control how much you paid in taxes each year…without spending money on things you don’t need? Sounds ideal doesn’t it? Well, in this article by Patrick Winters from Capital Conservator you will be shown how this is potentially possible for you to achieve.
Non-Recourse Factoring is one of the more powerful, yet simplistic strategies you can implement to get tax savings and asset protection for your small to medium sized company that rivals that of the large multi-national corporations, and in this guide to using offshore factoring to cut business tax bills you will be shown how the concept works. Please note, at Degtev we do not condone illegal taxation avoidance and would always advise anyone considering any strategy to reduce their tax bill to ensure the action they are about to take is 100% applicable for their own personal circumstances.
What is “Non-recourse Factoring”?
Well, factoring is a commonly employed business solution for a company that needs short term liquidity, or would like to accelerate its cash flow. Factoring involves a company that has extended credit, often in the form of vendor financing to customers, selling this accounts receivable in return for cash.
Because the time before collection of the outstanding debts can be finalized and the uncertainty of collecting on the accounts receivable, the company’s a/r will be discounted by some “factor.” Depending on the credit history, industry, time to collection etc., discounts on the accounts receivable can run between 10%, to over half the eventual possible receivable(s).
“Non-recourse” means that the purchaser of the receivable cannot attempt to collect from the original holder of the receivable if the debt becomes uncollectible in the future.
How Can “Non-Recourse Factoring” Reduce Your Tax Bill
In order to illustrate the specifics of how offshore factoring works and what it can do for you, I’ll use a hypothetical case study using a fictional character named Dr. Benedict.
Dr. Benedict has his own medical practice. He is worried about having his assets exposed to frivolous litigation. Many of his friends have shut down their private practices because of the cost of malpractice insurance…but Dr. Benedict really has a passion for helping people and doesn’t want to quit.
So, what does Dr. Benedict do?
1) He sets up an offshore structure.
2) He transfers some post tax funds to the offshore structure. The offshore structure will take on the role of the ‘factor.’
3) He sells his accounts receivable to the offshore structure at a discounted priced. Non-recourse factoring (where the factor takes on the risks of your clients not paying) discounts depend on the market rate, but in many places it can be as high as 70%. So let’s say the doctor sells his accounts receivable to his offshore structure for 30% of their value.
4) He then only pays tax on that 30%. The rest is collected by the offshore structure tax-free.
5) The doctor’s practice continues to collect payments from the accounts receivable, and remits these on to the offshore factor.
Not only is the doctor shaving his tax bill down to a husk of its former self, he’s also protecting the tax-free money that he’s earned. If somewhere down the line he is brought to court by a patient or faces financial difficulties, that offshore nest egg is going to be incredibly hard to attack. The saved cash can then just sit offshore gathering interest, or be invested elsewhere – potentially tax free. He does of course potentially have a reporting requirement, depending on the jurisdiction in which he lives.
The most complex part of this deal is setting up the offshore structure, but there are people at hand who can help with that. Capital Conservator has a decade of experience helping people to unlock wealth by moving their assets offshore. Founded by CEO David Finzer after 20 years experience as a consumer of offshore services, Capital Conservator specialises in offshore accounts with unlimited wire transfers and unrivalled privacy.
This tip isn’t our only giveaway, there’s a host of other tax-neutral and tax-advantaged offshore strategies in our armoury that can potentially increase your financial security. So, if you think you can benefit from offshore factoring or you would like to learn more or get started with an offshore account right away! Email the author of this article at email@example.com to arrange for a personal consultation free of charge.