I HATE paying taxes! Interesting story for (I guess) almost anybody!

15 years ago

What about raising the price or moving?

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severt 15 years ago

Originally Posted by Dan C. Rinnert

What about raising the price or moving?

Yes raising the price is an option ... however if I raise it with $100 I only make about $47 bucks more because of those taxes...

Dennis
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Kim Standerline

15 years ago

Don't move to the UK, I'm paying just under 50% tax. (It's really pissing me off)

Originally Posted by Dan C. Rinnert

What about raising the price or moving?

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ExRat

15 years ago

Hi,

1st - only take tax and legal advice from relevant professionals. Plus, each country is different.

That said -

Example: I sell a product for $497 and give away 50% to the JV partner.
So $497 - 19% tax = $402
Then $402 - $250 for my partner = $152.57
Then $152.57 - 42% income taxes = $88,49

You shouldn't be paying tax on the $497, just the half that you keep (after expenses have been deducted).

Example - if you buy some widgets for $50k, sell them for $100k you pay tax on the $50k profit (after expenses), not on the $100k.

The payment for the JV partner is a business expense which should be deducted before calculating the tax on your profit. If the JV partner drove traffic to an offer, it's no different to paying google adwords to drive traffic. If you spend $90k on adwords to return $100k -therefore making $10k profit - you don't pay tax on $100k - you would go bankrupt.

But - see my first sentence. Get professional advice.

For those interested in offshore stuff -

a) search for 'sovereign lifestyle' and 'perpetual traveller'.

b) I just watched a program on TV (Panorama - BBC)about tax havens, the Liechtenstein whistle blower, Obama's plans and the plans of the other 12 countries alleged to have bought the leaked data from Liechtenstein's LGT bank.

A site that I am a member of that I find useful for this type of info is -

the site

HTH

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Neil Morgan 15 years ago

In the UK, if you work a J-O-B and have extra income from IM then you feel it most.

Why?

Because your personal tax-free allowance (circa £6,000) and the standard rate (22% last year) for income up to (circa) £35,000 is all eaten up by your salary from your J-O-B, meaning that all of your IM profit costs you 40% tax plus 8% class 4 national insurance.

If you don't have a J-O-B then things are much better, not to mention the fact that you have zillions more time and energy to put into your business.

If there are two of you in the business (eg husband and wife) then you both have personal allowances and higher rate thresholds. You could earn around £12,000 profit between you before paying any tax at all and around £72,000 between you before either of you hit the higher rate.

The figures are approximate and refer to year 2007-08.

Cheers,

Neil
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serrow

15 years ago

hmm... Taxes DO suck. but there are ways of getting through all of your needs. Essentially, you only need to be paying taxes when you're profiting. You should work a little closer with your CPA - a couple points. You're paying taxes on the expenses to your partner - why is he/she not doing this? and the 42% income taxes? That seems high - you should start gathering up some serious deductions to lessen that. I make a pretty good living but my tax exposure is only at about 18% total with state and federal after all of my deductions, mortgage interest, etc.

Thanks
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severt 15 years ago

Originally Posted by serrow

You're paying taxes on the expenses to your partner - why is he/she not doing this?

Good question!
But I have never seen an affiliate increasing the commission because of that... I'm very interested how other marketers do this...
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- HeySal 15 years ago
  
  Originally Posted by severt
  
  Good question!
  But I have never seen an affiliate increasing the commission because of that... I'm very interested how other marketers do this...
  
  Um....sure they aren't increasing the commission. But YOU are paying taxes on THEIR income? It's not your income if someone else is getting it. You should be subtracting their income share from your share.
  
  You need an accountant - badly.
  
  EDITED: Sorry, I didn't notice you aren't in the US. Not sure how your taxes work over there, but I'd still go find an accountant to at least let you know what you are missing.
  
  Thanks
  
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  Sal
  When the Roads and Paths end, learn to guide yourself through the wilderness
  Beyond the Path
  
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Crash878

15 years ago

you are getting ripped on taxes man

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Steadyon

15 years ago

Set up a company. Leave some of the profits in the company, pay less tax on it.

Or set up an overseas company but don't bring any of the income back into your country.

These are the basic outlines and it will need further tax advice, but these are some of the main legitimate ways.

Thanks
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severt

15 years ago

Originally Posted by Steadyon

Set up a company. Leave some of the profits in the company, pay less tax on it.

Or set up an overseas company but don't bring any of the income back into your country.

These are the basic outlines and it will need further tax advice, but these are some of the main legitimate ways.

Yes that's true, but the main reason I wanted to succeed in IM is because of the freedom. If I can't take the money out of my business then what's the use ?

Of course there are ways to trick some things but if I want to buy a fancy house then I need money...

Thanks
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Micheal Perkins

15 years ago

Originally Posted by severt

Yes that's true, but the main reason I wanted to succeed in IM is because of the freedom. If I can't take the money out of my business then what's the use ?

Of course there are ways to trick some things but if I want to buy a fancy house then I need money...

Now I don't know how well this will work, just kind of thinking out loud.

But will leaving the money in the business help lower your tax liability? If so since one of your goals is to get a nice house, just make the business responsible for making the house payment instead of you. You would still get the house and maybe lower your tax liability.

Then you can pay yourself a smaller salary because the home loan and any other needs you have could be paid for by the company, like utilities for the house, car payments, etc.

Thanks

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MuayThaiGuy

15 years ago

I'm from Canada and I actually have the option of incorporating offshore in a tax haven, forfitting my "residency" for tax purposes and just making sure I don't stay in Canada for more than 183 days per year..

If you don't have any ties to where you live now, and you don't mind travelling around, you should consult with a tax laywer and see what your options are...

I have no issue with breaking my "ties" to Canada and spending half my time elsewhere, but everyone's situation is different..

Thanks
1 reply

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Alex Sol

15 years ago

Originally Posted by MuayThaiGuy

I'm from Canada and I actually have the option of incorporating offshore in a tax haven, forfitting my "residency" for tax purposes and just making sure I don't stay in Canada for more than 183 days per year..

If you don't have any ties to where you live now, and you don't mind travelling around, you should consult with a tax laywer and see what your options are...

I have no issue with breaking my "ties" to Canada and spending half my time elsewhere, but everyone's situation is different..

Wow, that sounds like an awesome idea.
One question though, you have the Canadian citizenship only or is it a double citizenship?

+ if you make over $100k a year, can't you simply incorporate a company and pay about 15%-19% in taxes? (depending on what province you live in...) + pay yourself a small salary?

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severt

15 years ago

Originally Posted by Rhys Davies

You only get taxed once on a sum of money.

I think the way you have calculated that, is taxing yourself on your earnings and then taxing the same amount of money again after affiliate commision has been paid

if you sell it for $497 and give half away in commisions thats $248 for you. you said your tax is 42%

42% of 248 = 104.16

so that means you will earn $143.84 per sale. I dont think you need to pay 42% btw, thats really high

I calculated the money when my income exceeds the $50k bar.
And because this product is going to be heavily promoted I have 100% faith that I will exceed that $50k....

Tomorrow I have an appointment with the (not sure how to call it) Tax dude company

Dennis

Thanks

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Steadyon

15 years ago

Originally Posted by Rhys Davies

You only get taxed once on a sum of money.

I think the way you have calculated that, is taxing yourself on your earnings and then taxing the same amount of money again after affiliate commision has been paid

if you sell it for $497 and give half away in commisions thats $248 for you. you said your tax is 42%

42% of 248 = 104.16

so that means you will earn $143.84 per sale. I dont think you need to pay 42% btw, thats really high

Actually, this is not true at all. There are many hidden money pits concerning taxes and you can quite easily get taxed twice on the same income once your tax affairs get a little more complex. I won't go into it, but you can get taxed twice. Not that unusual actually, but it's not likely to affect the average employee or small business owner.

Also 42% tax is VERY believable. How much do you think you pay in the UK? Certainly more than you realise, especially once you get into higher rate tax bands.

Thanks

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graphicsgenie

15 years ago

I believe tax in Holland is higher than in the UK.

But I would guess that the 42% on a $50k would be for profit above $50k, I imagine there will be a lower band tax for income before that

With imaginery numbers, say you earn $100,000

the first $50k might be at 25% tax, and the remaining $50k at 42%

So your tax liability would be:

$50k x 0.25 = $12.5k

$50K X 0.42 = $21k

So for an income of $100k, you would have to pay $33.5k tax,

Not as bad as simply putting all $100k straight to 42% just becuase you think it will sell well.

Again, no major tax knowledge, just spouting

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Steadyon

15 years ago

Quote: "I'm paying around 20% in the UK right now"

-------

What about National Insurance?

What about VAT?

What about property tax?

What about Excise Duty?

What about Stamp Duty?

Also, once you hit higher rates you can double the 20% tax rate.

These are all taxes but disguised with different names. Different governments have different rates but also different governments give different levels of "service" to it citizens etc...

Once you start making higher rate tax incomes or once it looks like you will, you really ought to seek proper tax planning advice.

Thanks

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cypherslock

15 years ago

Hey MuayThaiGuy, have you got an "official" link to some info on that. It might take a bit to persuade my wife but I think so long as she gets her "snow time" (I hate winter personally) the option to keep more of OUR money (it is ours not our governments) is appealing. Please PM me or let me know. Thanks man! the nice thing is we could travel, which she loves....

Thanks

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matthewd

15 years ago

This is the reason I love the FairTax!

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xlfutur1

15 years ago

Just buy some real estate and get some really good tax writeoffs. Or just do like Daschle and the Treasury Sec. and simply don't pay most of them.

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MARK BRAVO 15 years ago

THAN YOU NEED TO LEARN ABOUT CORPORATIONS,INCORPORATE AND GROW RICH.
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Teenage Genius

15 years ago

Do you guys realise you don't actually have to pay taxes... Theres a MASSIVE thing about this on youtube, about how the government refuse to talk about it and how they refuse to show evidence that you are in fact obliged to pay taxes. Look it up

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Floyd Fisher

15 years ago

Originally Posted by Teenage Genius

Do you guys realise you don't actually have to pay taxes... Theres a MASSIVE thing about this on youtube, about how the government refuse to talk about it and how they refuse to show evidence that you are in fact obliged to pay taxes. Look it up

Follow that advice....and end up in jail.

Here's a site dedicated to answering this:

Frauds and Scams | Crimes of Persuasion - An Investigators Resource

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Darrel Hawes

15 years ago

Originally Posted by Teenage Genius

Do you guys realise you don't actually have to pay taxes... Theres a MASSIVE thing about this on youtube, about how the government refuse to talk about it and how they refuse to show evidence that you are in fact obliged to pay taxes. Look it up

Let us know how that works for you.

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MARK BRAVO

15 years ago

what you need to do is start a llc or corportion this is the greatest gift from our government,example if you made 100,000 you could put 15% on a selfdirected ira that will cut you income down from 100,000 to 85,000 plus your car payment plus if you have a s corp your taxes will be only 15%.

MARK BRAVO

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JustVisiting

15 years ago

Originally Posted by severt

Example: I sell a product for $497 and give away 50% to the JV partner.
So $497 - 19% tax = $402
Then $402 - $250 for my partner = $152.57
Then $152.57 - 42% income taxes = $88,49

Here's my take on this.

Is the 19% VAT ??

If so, you are selling the product for $417.64 before tax.

You need to give 50% of the $417.64 to your jv = $208.82.

You keep the remaining 50% + the 19% VAT (which you pass on
to the government). Therefore you keep $208.82 + $79.36 = $288.18

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severt

15 years ago

Originally Posted by JustVisiting

Here's my take on this.

Is the 19% VAT ??

If so, you are selling the product for $417.64 before tax.

You need to give 50% of the $417.64 to your jv = $208.82.

You keep the remaining 50% + the 19% VAT (which you pass on
to the government). Therefore you keep $208.82 + $79.36 = $288.18

Well not exactly.
When I tell my partners they get 50% of $497 they expect to get around $250. If I pay them $208.82 and tell them it's because of taxes I think they are going to get mad at me...

However, here in the Netherlands we have 2 main type of taxes.

TAX / VAT / you name it (19%)
Income Taxes (variates from 32.35% / 52%

So after I have payed the government 19% I also have to pay an x percentage of my profit.

If I make 46k or more in profits, I need to pay 52% taxes!!! + the 19% I already paid!

Someone should write a book about it

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JustVisiting

15 years ago

Originally Posted by severt

Well not exactly.
When I tell my partners they get 50% of $497 they expect to get around $250. If I pay them $208.82 and tell them it's because of taxes I think they are going to get mad at me...

However, here in the Netherlands we have 2 main type of taxes.

TAX / VAT / you name it (19%)
Income Taxes (variates from 32.35% / 52%

So after I have payed the government 19% I also have to pay an x percentage of my profit.

If I make 46k or more in profits, I need to pay 52% taxes!!! + the 19% I already paid!

Someone should write a book about it

So why not pay your affiliates 42% of $497 ? That is $208.82.
or price the product at $417 + tax ; so the affiliates can see they are getting 50% of the sale.

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AtticusBaker

15 years ago

My take on taxes is that if 10% is good enough for Jesus, it ought to be good enough for Uncle Sam. FairTax is a little high, but SOOO much better than what we have going on in the USA right now. As for you poor UK folks, you have my condolences.

Cheers!

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chris_surfrider

15 years ago

Talk to a tax attorney whose clients aren't in jail.

You'd be surprised how many alleged hot-shot tax attorneys out there have actually taken their clients so far down the "gray" path that they've been audited, charged and in some cases thrown in prison.

Do your homework. The IRS (or in my case CRA) doesn't screw around. They've seen every trick, every loophole.

The best strategy, in my opinion, is to make enough money that it doesn't really matter or affect your lifestyle.

I know that sounds dumb, but at least you can do that AND sleep at night, too.

Other than that, consult your CPA or legit tax attorney about your options regarding incorporation, suitable write-offs, business structure and so on. I would also suggest considering things like investing in solid things like real estate or whatever you feel comfortable with.

Obviously your investments will require some learning curve (and timing!) and so on, but at least you can build up some equity or share value or whatever, and when you sell them at a profit, you're just paying capital gain tax.

The idea is to build your net worth as efficiently as possible WITHIN the current system.

I suggest that you don't try and "beat" it.

-Chris

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Thomas

15 years ago

Originally Posted by Teenage Genius

Do you guys realise you don't actually have to pay taxes... Theres a MASSIVE thing about this on youtube, about how the government refuse to talk about it and how they refuse to show evidence that you are in fact obliged to pay taxes. Look it up

Wesley Snipes thought the same thing; follow that advice and you might get to discuss it with Snipes if you are in the same cell. Besides, the Dutch Government and the U.S. Government are not one-and-the-same.

Originally Posted by MARK BRAVO

...if you made 100,000 you could put 15% on a selfdirected ira that will cut you income down from 100,000 to 85,000 plus your car payment plus if you have a s corp your taxes will be only 15%.

Pretty useless advice for someone in the Netherlands.

Originally Posted by SeanyG

The company pays you a low low 'salary' as a director but then the company buys all of your stuff for you (rent / mortgage, phone, gas, car etc

Do that and you'll be praying you get just a tax audit!

Originally Posted by severt

+ the 19% I already paid!

That's not how VAT works; the 19% was/is not yours in the first place; you are not paying it (out of your own pocket); it's not income. You are quite literally acting as a tax collector on behalf of the Government (who is levying the tax on the person who made the final purchase). The only thing you can do with that 19% is reduce it by the amount (of VAT) you pay on your (legitimate) business expenses.

You certainly can't give 50% of it to your JV partner. You can only give them a percentage of your VAT-exclusive price (which is the actual price you sell the product for anyway). And, because of that, in your present situation, you are not paying your JV partner 50%! You are actually paying them 59.5%.

Tommy.

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bobmcalister

15 years ago

well havent googled any info but I am guessing that you have free health insurance, good social security system and several other venues for social support ...or I am incorrect?

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BigSexy

15 years ago

Also here in Italy the tax pressure is very high, but all the social services aren't that good...and we even have one of the highest public debt in the world, duh.

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Floyd Fisher

15 years ago

Originally Posted by severt

Hi guys,

When I first started out doing Internet Marketing I thought "Hej let's make some big bucks!". And now that I'm doing pretty well I have to pay 19% taxes + 42% income taxes!!

OMG.

Example: I sell a product for $497 and give away 50% to the JV partner.
So $497 - 19% tax = $402
Then $402 - $250 for my partner = $152.57
Then $152.57 - 42% income taxes = $88,49

So of every product I sell for $497 I only have left: $88.49 !!

That's insane!

I'm very curious to your opinions / idea's how to INCREASE the profit!

One thing I can do is give my JV partners less commissions.
But I'm not sure if my partners are still interested in promoting a 30% / 40% product.

Dennis

How about do things to lower taxes instead? Talk to a tax professional in your country for ideas.

Thanks
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SeanyG

15 years ago

Originally Posted by Floyd Fisher

How about do things to lower taxes instead? Talk to a tax professional in your country for ideas.

Its very simple, you should be able to run all of your "business" *cough* life *cough* expenses through your incorporated company. The company pays you a low low 'salary' as a director but then the company buys all of your stuff for you (rent / mortgage, phone, gas, car etc - talk to your local accountant about what you can and can't buy through your company).

This is good because incorporated companies have a lower tax rate than the personal tax rate of individuals. So the company pays less tax and also gets to write off the expense against whatever profit you show.

Ask your accountant about setting up a holding company. Most financially successful people have a holding company or companies.

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Steadyon

15 years ago

Originally Posted by SeanyG

Its very simple, you should be able to run all of your "business" *cough* life *cough* expenses through your incorporated company. The company pays you a low low 'salary' as a director but then the company buys all of your stuff for you (rent / mortgage, phone, gas, car etc - talk to your local accountant about what you can and can't buy through your company).

This is good because incorporated companies have a lower tax rate than the personal tax rate of individuals. So the company pays less tax and also gets to write off the expense against whatever profit you show.

Ask your accountant about setting up a holding company. Most financially successful people have a holding company or companies.

I don't know which country you are in, but you can't do that in the UK.

Well actually you can, but they charge you tax and even NI on that as the items you mentioned which would be paid on behalf of the director of the company, would be treated as benefits-in-kind and one would be worse off than not doing it in the first place.

Probably the same in many countries.

If the expense you are trying to claim isn't a valid business expense, then you are asking for trouble.

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Chris Thompson

15 years ago

Fellow Canadians - I've seen a few of you on this thread asking about offshore income so here is a quick rundown of the basics as I understand it. Keep in mind I have never seriously explored this because I am not willing to sever my ties to Canada at this point in my life. I have young kids and we have loads of family here. But I've done some reading on it and studied some tax stuff on this in my MBA days.

The best starting book is called "Take your money and run". It's written by a guy who actually did it. This is all totally legal. This is NOT about tax evasion in any way.

If you are Canadian, unlike folks in the USA, you are not obligated to pay income taxes on your worldwide income even as a non-resident. Americans must pay income tax in the USA no matter where they live (caveat is there are tax treaties between various countries).

The concept for a Canuck is that you must do the following:

1) Give up Canadian residency, generally this involves selling ALL assets, cancelling credit cards, bank accounts, and even professional association memberships. My MBA prof basically described it as "don't even own a toothbrush in Canada". Then you move somewhere else.

2) Pick a place to live that has zero or very low tax on personal income. There are plenty of places, and you can setup residency there. You can setup your business in the same tax haven or a different one. Most people recommend redidency in one, and business setup in another.

3) This is internet marketing - just conduct your business from wherever you like as you normally do. Beauty of the Internet is you can be anywhere.

4) Enjoy life with very low taxes.

Now, are NOT giving up Canadian citizenship to do this. You are giving up RESIDENCY. They are not the same thing. And you can come back to Canada any time you like and re-establish residency if you wish.

You can also come and visit Canada as long as you spend more than 1/2 the year outside of the country. But don't keep a sailing membership in Canada, don't be a member of any association of anykind, don't have a bank account or credit card in Canada, don't own a house, don't own a car, etc.

That's the basics of it as I know it. If you have no kids, or if you are totally single and willing to change your lifestyle a lot, this can be an attractive option for a lot of people.

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Melkor

15 years ago

Consult a tax professional. There are legitimate ways to reduce your income or write off expenses, but there are also ways you can trick yourself right into jail. Get professional help from a licensed professional who isn't some kind of hotshot willing to risk you getting jail time to make him look good for a while.

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severt

15 years ago

Thank everybody!

Short answer: I'm gonna consult a tax professional.

Dennis

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Christopher R Everson

15 years ago

You know what the kicker is?

Go find a Government law that explicitly states you need to pay in a direct income tax. Bet you can't find one.

Then go look up how money is actually printed in the united states.

Then go look up how exactly the Federal Reserve works, and why every, SINGLE, dollar that is "created" already has debt and interest associated with it.

That being said, don't bother asking here. Go to a professional and learn the facts.

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Thomas

15 years ago

Originally Posted by Christopher R Everson

You know what the kicker is?

Go find a Government law that explicitly states you need to pay in a direct income tax. Bet you can't find one.

Then go look up how money is actually printed in the united states.

Then go look up how exactly the Federal Reserve works, and why every, SINGLE, dollar that is "created" already has debt and interest associated with it.

Since the OP is in the Netherlands, none of that matters. (Even if he were in the U.S., it still wouldn't matter.)

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Steadyon

15 years ago

Quick overview
===========

Generally, operating a business as a company or incorporation is usually a good idea in this litigious age. There are some setup costs which if your business is growing or is in a risky market is definitely money well spent.

There is usually a slightly higher cost each year in terms of accounts preparation and corporate paperwork, but usually it is not too onerous.

Now, there are two general classes of taxes you need to be aware of. This applies to most Western Countries I am familiar with and it goes along the lines of:

The company (as it is it's own legal entity) has it's own taxes that it needs to be paid. This would be corporation tax or state tax or federal tax. But it is calculated as a certain percentage of the taxable profits. This tax rate for small companies (a small company has approximately a few million in sales max) can be relatively low, such as 20% or in the UK 21% for example.

If you take money out of a company there are two main ways. As a salary like all the other employees, which will be subject to payroll taxes just like everyone else. The other main way to take money out of a company is by taking a share of the profits as a dividend.

Now, depending on how much money you take out depends on how much tax you pay.

So the company could pay 20% tax on its profits and if you then take out so much money that you go into the higher rate tax bands (could be 40% to 50%) then you will have to pay the extra tax personally out of the money you took out.

So if you really want to keep your taxes as low as possible, use a company and try not to take out too much money which would put you into a higher rate tax bracket. Leave as much as you can in the company. Then one day hopefully, you can sell it or cash in your chips and just pay a smaller tax rate on the capital gain from selling the company.

The ultimate solution as mentioned many times is to make so much profit/income that you don't have to worry about a high tax bill.

I hope this sheds a bit of light on the company / sole trader arguments for tax purposes etc.

Thanks
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Rob Perks 15 years ago

The Truth shall set you free.....is the most POWERFUL statement uttered in the history of any race.

Follow the path of truth and taxes and other such lies fall by the boards.

Rob Perks
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Melkor

15 years ago

It doesn't matter what you think about taxes and their lack of legitimacy. As Wesley Snipes found out, the only thing that matters is what the government thinks about taxes and what you owe them.

As long as the government holds all the cards and all the jail cells, you need to play by their rules or you'll get to see what your taxes pay for in the way of jails from the inside.

Besides, taxes pay for your share of the bills for the infrastructure that allows us to run a business in the first place, the legal framework that guarantees property rights. That we've been upsold on a whole lot of extraneous crap doesn't detract from the basics we're paying for, does it?

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Rachel Zaouche

15 years ago

Hi everyone

Firstly let me say I am a qualified financial planner so am very aware of tax issues etc. Being a CFP, I can be authorised to give advice anywhere in the world but I wouldn't do it. Why? Because I don't know enough about the local laws and I could cause serious financial harm to my clients (never mind get myself a little holiday paid for my Her Majesty!)

I was one of the first Chartered Financial Planners in the UK and am in the rare minority of having both that qualification and the Certified Financial Planners qualification.

I am not telling you this to boast - I am just trying to highlight that I know what I am talking about and the advice I would give you is

STOP taking advice from people who are not qualified to give advice on a very complicated subject - this is not just aimed at some of the posts on this thread but also at some of the so called professionals who populate the tax planning world.

Despite the fact that I am very well qualified in tax planning (IN THE UK ONLY) I couldnt advise you properly as I dont know your personal circumstances, the rules of your jurisdiction, how your business has been set up (legal structure etc) etc etc etc etc etc

Everybody who is serious about their IM business needs to seek advice from a properly qualified individual, preferably one who understands the IM world.

As other posters here have said, you can get into seriously trouble trying to commit fraud which is what tax evasion is. There has been some very valuable comments made and a lot of relevant examples used eg Wesley Snipes.

Here in the UK, you can go to prison which may be slightly preferable to having the tax office investigate your tax affairs from the day you started earning anything.

In the US, you might want to consider that Al Copone went to prison for income tax evasion and not his mobster activities.

There are very legitimate ways of reducing your tax bill and giving up your nationality doesnt have to be one of them! I don't know anything about tax planning in Canada or the Netherlands etc BUT most governments work the same way in that they allow, sometimes very generous, ways of reducing tax bills. Some countries give additional tax breaks to new business people. And guess what - IM is a business or at least it should be.

In the UK people are often advised to start a company when they go into IM and that is good advice for some. BUT it is awful advice for others.

For example, as soon as you set up a LTD company you become potentially liable to employers national insurance as well as employees national insurance. So Joe sets up Do it my way LTD and earns £30,000 via his new company. He wants to pay himself a salary - that salary is liable to national insurance in the usual way. BUT Do it My Way LTD also has to pay employers national insurance on that salary. There are ways around this but it is complicated and I am not going to do into them here.

If Joe had set up a limited liability partnership, he is still classified as self employed so there is no employers National Insurance. Also if he is married, his wife can become involved in the business and as it is a partnership can benefit from tax savings.

BUT there are serious disadvantages on partnerships as well for some people so again TAKE ADVICE relevant to your circumstances.

Perhaps more relevant, a lot of people make a loss in IM when they start. If they remained self employed this loss can be offset against the income that they earned in previous years and can trigger a tax refund.

Hopefully I have made my point. I don't mean to offend anyone who posted but if I gave some of the advice given on this thread to my clients, I would be accompanying them to jail!!!

As one of my friends who lives in Australia put it, "if you gave me the choice between being investigated by the Australian Tax Office or being bitten by a snake, I would take the snake!"

Finally, it should be remembered that you only have to worry about tax if you are making a profit. Please dont let the tax tail wag the dog i.e. set your IM business up properly, PAY for decent advice (tax deductible in most cases) and go out and make a lot of money.

Take care

Rach

ps I really hope that I haven't offended anyone. Believe me, not paying your correct taxes is a HUGE mistake and not worth the effort and time involved. Reduce your tax bill by all means but use the many legitimate and clever ways to do it.

[ 2 ] Thanks
1 reply

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Steadyon

15 years ago

Originally Posted by Rachel Zaouche

Hi everyone

Firstly let me say I am a qualified financial planner so am very aware of tax issues etc. Being a CFP, I can be authorised to give advice anywhere in the world but I wouldn't do it. Why? Because I don't know enough about the local laws and I could cause serious financial harm to my clients (never mind get myself a little holiday paid for my Her Majesty!)

I was one of the first Chartered Financial Planners in the UK and am in the rare minority of having both that qualification and the Certified Financial Planners qualification.

I am not telling you this to boast - I am just trying to highlight that I know what I am talking about and the advice I would give you is

STOP taking advice from people who are not qualified to give advice on a very complicated subject - this is not just aimed at some of the posts on this thread but also at some of the so called professionals who populate the tax planning world.

Despite the fact that I am very well qualified in tax planning (IN THE UK ONLY) I couldnt advise you properly as I dont know your personal circumstances, the rules of your jurisdiction, how your business has been set up (legal structure etc) etc etc etc etc etc

Everybody who is serious about their IM business needs to seek advice from a properly qualified individual, preferably one who understands the IM world.

As other posters here have said, you can get into seriously trouble trying to commit fraud which is what tax evasion is. There has been some very valuable comments made and a lot of relevant examples used eg Wesley Snipes.

Here in the UK, you can go to prison which may be slightly preferable to having the tax office investigate your tax affairs from the day you started earning anything.

In the US, you might want to consider that Al Copone went to prison for income tax evasion and not his mobster activities.

There are very legitimate ways of reducing your tax bill and giving up your nationality doesnt have to be one of them! I don't know anything about tax planning in Canada or the Netherlands etc BUT most governments work the same way in that they allow, sometimes very generous, ways of reducing tax bills. Some countries give additional tax breaks to new business people. And guess what - IM is a business or at least it should be.

In the UK people are often advised to start a company when they go into IM and that is good advice for some. BUT it is awful advice for others.

For example, as soon as you set up a LTD company you become potentially liable to employers national insurance as well as employees national insurance. So Joe sets up Do it my way LTD and earns £30,000 via his new company. He wants to pay himself a salary - that salary is liable to national insurance in the usual way. BUT Do it My Way LTD also has to pay employers national insurance on that salary. There are ways around this but it is complicated and I am not going to do into them here.

If Joe had set up a limited liability partnership, he is still classified as self employed so there is no employers National Insurance. Also if he is married, his wife can become involved in the business and as it is a partnership can benefit from tax savings.

BUT there are serious disadvantages on partnerships as well for some people so again TAKE ADVICE relevant to your circumstances.

Perhaps more relevant, a lot of people make a loss in IM when they start. If they remained self employed this loss can be offset against the income that they earned in previous years and can trigger a tax refund.

Hopefully I have made my point. I don't mean to offend anyone who posted but if I gave some of the advice given on this thread to my clients, I would be accompanying them to jail!!!

As one of my friends who lives in Australia put it, "if you gave me the choice between being investigated by the Australian Tax Office or being bitten by a snake, I would take the snake!"

Finally, it should be remembered that you only have to worry about tax if you are making a profit. Please dont let the tax tail wag the dog i.e. set your IM business up properly, PAY for decent advice (tax deductible in most cases) and go out and make a lot of money.

Take care

Rach

ps I really hope that I haven't offended anyone. Believe me, not paying your correct taxes is a HUGE mistake and not worth the effort and time involved. Reduce your tax bill by all means but use the many legitimate and clever ways to do it.

I fully agree with what you said, the main point being "seek professional advice".

However, I don't think this thread contains exact specific advice for anybody.

On a forum like this, there is nothing wrong with throwing a few ideas around and getting people to at least consider that there may be other options available to them.

Then they can do some more research and also go and see their advisors with at least some general background understanding. Only by doing this will they be able to ask the right questions of their advisor and so then get the proper advice.

Once again I stress that a person's tax affairs are his responsibility, no matter what advice you get from a professional. If you get bad advice, even from a pro, it is you that is responsible.

So in other words you owe it to yourself to try and learn at least the basic options available to you in your country and then hopefully the professional advice you get helps fine tune your legitimate tax planning.

Thanks
1 reply

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Rachel Zaouche

15 years ago

Originally Posted by Steadyon

I fully agree with what you said, the main point being "seek professional advice".

However, I don't think this thread contains exact specific advice for anybody.

On a forum like this, there is nothing wrong with throwing a few ideas around and getting people to at least consider that there may be other options available to them.

Then they can do some more research and also go and see their advisors with at least some general background understanding. Only by doing this will they be able to ask the right questions of their advisor and so then get the proper advice.

Once again I stress that a person's tax affairs are his responsibility, no matter what advice you get from a professional. If you get bad advice, even from a pro, it is you that is responsible.

So in other words you owe it to yourself to try and learn at least the basic options available to you in your country and then hopefully the professional advice you get helps fine tune your legitimate tax planning.

Spot on - Steady on (love the name) - I get a bit passionate about this stuff - I am the same when it comes up in the pub and the best tax plans is to hide the cash under the mattress.

I got a little worried about some of the comments in particular those that said that the government cant make you pay taxes and that you should move abroad.

But yeah - the point is get proper advice and when seeking advice always ask for testimonials from the tax planners other clients. A good qualification to look for here in the UK is a Chartered Tax Adviser as not all accountants or financial planners specialise in tax.

And I believe there is a warrior on here that specialises in tax planning but I cant remember his name.

Websites that may help are;

UK http://www.financialplanning.org.uk
Canada https://www.cifps.ca
US http://www.fpaforfinancialplanning.org/

Best wishes

Rach

[ 1 ] Thanks

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colibri

15 years ago

I agree with the above post. You can protest tax laws all you want but they exist and you have to work with it. Of course they are insane and unconstitutional and unfair but that does not make them any less unenforceable and that is all the counts. Governments can get away with all sorts of things that we as individuals cannot.

That being said, the ideas of giving up Canadian residency are good if you are not rooted in with a job you need and a family, etc., that keeps you there. I left Canada 3 years ago for this EXACT reason -- taxes are invasive and oppressive.

I have since learned many things.

1. Incorporate or see if there is another way to separate your business and personal INCOME: this splits your income immediately.
2. If you are married that again splits your personal income. You can have you spouse and any eligible kids 'work for you' in your home business and pay them and they file a tax return on THEIR income and pay hardly anything.
3. Maximize business expenses, including planning a business trip that CLEARLY LOOKS LIKE ONE and that is also your vacation. Free vacation. Includes using your car for some business purpose primarily even when you go out to a movie as a secondary purpose. You can claim deductions for a percentage of all car expenses, gas, repairs, insurance, you name it.
4. Take all possible tax deductions for a home business. This is a lot including payment processor fees and educational courses, advertising costs. Keep track of every penny you spend on your business.
5. And definitely make your JV partner cover their own taxes. If you sell a $500, their 50% of course comes AFTER TAXES not before. Make it clear in your JV that they receive 50% AFTER TAXES.

And most of all, take the best advice above and work with a tax pro.
The 'Take Your Money And Run' book is a good one (about 10 years old now and also has a sequel). I read them both and they are good and legal.

In Canada you need to go to the library or bookstore and get the latest book by TIM CESTNICK. He is the ultimate Canadian authority that gives helpful tax advice and he puts out an updated book every year. He has a website and for about $30 you can buy the book and save $$thousands in taxes.

Best of luck,
Ron (Canadian expat)

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zorus

15 years ago

anyone know how much corporate and personal taxes pay a LLC in delaware??

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islander1

15 years ago

I would say just hire a really good accountant and follow their advice. There's got to be a way (even in the Netherlands) to significantly reduce your tax burden.

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mormel

15 years ago

That might be so, but even within the European Union - where we have a free exchange of people and money, like in the federation of the US - the differences in tax levels are so immense, that the real big moneymakers tend to move to - for instance - Ireland en Belgium, where the income taxes are a LOT lower than - for instance - in the Netherlands (also know as Holland, with capital Amsterdam).
Someone who earns on a top level here in Holland pays up to 72% taxes in the top scales of his income. Lots of them then make the choice to move a few dozen kilometers to the south, to Belgium, where the income tax climate is much more capital friendly.
And that's only a small step, compared to people who go to live in Monaco or on the Cayman Islands to protect their fortune from the Horrible Taxman (he exists: I've seen him!).

Such differences don't exist within the US. Happily for the most of you...

Yours, dutchly, Ed

PS 'Dutch' means: 'from the Netherlands'

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lburrell

15 years ago

Whew what a thread!! But have no fear, the tax professional is here!!

Ok I cannot vouch for European tax rules, but I IMAGINE they are somewhat similar to the US's. Plus, in about 5 years, under IASB rules, we will all have the same accounting practices and procedures so I will be more valuable to everyone then I guess.

ANYWAYS...

Your problem is that you are paying taxes at an extremely high rate, your personal income tax rate. You need to set up a passthrough corporation (Partnership or S Corp) so you will pay a lower tax percentage. Plus, you will be able to be much more liberal with your expense deductions. That 50% you pay your JV's, totally deductible as COGS. It is now their responsibility to claim that income (they are essentially an independent contractor). If they sell alot of products for you, (in the US atleast) you would issue them a 1099 form so they can claim that income and pay taxes on it.

Go speak with a tax pro in your home country for more specifics, but I just gave you a general idea of what you can do to lower your tax burden (alot). Think about it this way. You might pay your tax pro $1000 to give you advice and do your return to minimize your tax liability, but he may SAVE you $2500 in taxes b/c he knows his shit (hopefully).

Is it worth it then?? HELL YES IT IS! Alot of ppl can't see the forest through the trees.

There are alot of idiosyncrasies with tax issues relating to online income. It is your right as a citizen of your respected country to pay the least amount of tax legally possible, but DO NOT try to evade them. You will get caught and it will suck big time.

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artwebster

15 years ago

Ye Gods and little fishes - if ever there was bad 'advice' - this is it - If so since one of your goals is to get a nice house, just make the business responsible for making the house payment instead of you. You would still get the house and maybe lower your tax liability.

The only way for a company to buy a house is for the company to own it.
If you use company money to pay your mortgage on your house, that is simply classed as drawings and taxed as income.

There are inherent dangers in living in a company house. For a start, you will be taxed on the estimated rent that the house would earn as if you were simply a non related tenant. Secondly, as a company asset, it is vulnerable if the company goes down. Third, selling a private house has distinct tax advantages since you will be expected to be using the proceeds to buy another one. Selling a company asset is taxed at whatever rate the company is taxed at and, in some cases, could create phenomenal marginal tax rates.

Best advice - go to the tax office and get advice and as much literature relating to your situation as is available then, after educating yourself a little, seek a good local accountant who also has a tax consultancy.

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lburrell

15 years ago

Originally Posted by artwebster

Ye Gods and little fishes - if ever there was bad 'advice' - this is it - If so since one of your goals is to get a nice house, just make the business responsible for making the house payment instead of you. You would still get the house and maybe lower your tax liability.

The only way for a company to buy a house is for the company to own it.
If you use company money to pay your mortgage on your house, that is simply classed as drawings and taxed as income.

There are inherent dangers in living in a company house. For a start, you will be taxed on the estimated rent that the house would earn as if you were simply a non related tenant. Secondly, as a company asset, it is vulnerable if the company goes down. Third, selling a private house has distinct tax advantages since you will be expected to be using the proceeds to buy another one. Selling a company asset is taxed at whatever rate the company is taxed at and, in some cases, could create phenomenal marginal tax rates.

.

Not only that, but if for some reason the biz gets sued and the house is in the biz's name, WHOOP your house is GONE just like that

terrible advice whoever thought of that one

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ShayB

15 years ago

Originally Posted by artwebster

Ye Gods and little fishes - if ever there was bad 'advice' - this is it - If so since one of your goals is to get a nice house, just make the business responsible for making the house payment instead of you. You would still get the house and maybe lower your tax liability.

This sounds like a Robert Kiyosaki saying/advice. (Rich Dad, Poor Dad) Am I right? Seems like I read that in one of his books.

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Steve Peters Benn

15 years ago

Steadyon:

I'm sure you meant nothing wrong in what you wrote, but I worry it might put off newbies as it is misleading as it portrays taxs as all being one lumped together, which can seem quite scary.

Quote: "I'm paying around 20% in the UK right now"

-------

What about National Insurance? - That would come before profit - so doesnt affect business tax except to reduce it.

What about VAT? Could well be zero rated, unless all sales were in the UK..

What about property tax? ???????

What about Excise Duty? He isnt importing....

What about Stamp Duty? - Is the guy buying property?

Also, once you hit higher rates you can double the 20% tax rate. -

If he is a sole trader - which he would be insane to be. Its best not to make blanket statements about tax, as it can confuse beginners, particularly if you don't deal with these tax issues yourself.

If you are talking about total tax burden, then yes, but that applies anywhere. This guy wants to reduce the tax he pays on profit. Over and above social government commitments we all face.

Once you start making higher rate tax incomes or once it looks like you will, you really ought to seek proper tax planning advice.

Amen to that.

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Steadyon

15 years ago

I won't argue the toss about what you are saying, because it would take me too long. Let me just say without sounding pompous that I am well versed in UK tax law and company tax law in particular.

I have set out some common strategies in some of my posts in this thread.

I can't see how any of it can put off a newbie, whether earning income via the internet or any other offline business they may start.

At the end of the day, certainly once your income is high enough, you owe it to yourself to seek proper tax advice. Amongst other things, usually this will entail trading via a Limited Company (same in the US).

Better protection and potentially better tax planning.

Thanks

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I HATE paying taxes! Interesting story for (I guess) almost anybody!

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