Offshore factoring can reduce your business tax by 70%
What is offshore factoring? How does it work? Find out how to reduce your business tax by up to 70%
What if there was a way to virtually CONTROL how much you pay in taxes each year… WITHOUT spending money on things you don’t need?
Non-recourse factoring is one of the most powerful, yet simplistic strategies you can implement to gain tax savings and asset protection for your small or medium-sized business that competes with large multinational corporations.
What is “Non-Recourse Factoring”?
Well, factoring is a commonly used business solution for a business that needs short-term liquidity or wants to speed up its cash flow. Factoring involves a company that has extended credit, often in the form of vendor financing to customers, selling these receivables for cash.
Because of the time it takes before collection of outstanding debts can be finalized and the uncertainty of collecting accounts receivable, the company’s accounts receivable will be discounted by some “factor.” Depending on credit history, industry, collection time, etc., discounts on receivables can range from 10% to more than half of the possible eventual receivable(s). (is).
“Non-recourse” means that the buyer of the receivable cannot attempt to collect from the original holder of the receivable if the debt becomes uncollectible in the future.
Here’s How “Non-Recourse Factoring” Can Virtually Eliminate Your Tax Bill
To illustrate the details of how this works and what it can do for you, I’ll use a hypothetical case study involving a fictional character named Dr. Benedict.
Dr. Benedict runs his own private practice. He worries that his assets are endangered by unnecessary laws. Many of his friends have closed his business because they are concerned about the cost of malpractice insurance… but he hates to see his work go to waste and doesn’t want to leave the job he loves.
What does Dr. Benedict do?
1) Establish an offshore structure.
2) Transfer some after-tax funds to the offshore structure. The offshore structure will assume the role of the ‘factor’.
3) You sell your accounts receivable to the offshore structure at a discounted price. Non-recourse factoring discounts (where the factor assumes the risk of its customers not paying) depend on the market rate, but in many places can be as high as 70%. So let’s say that the Doctor sells his receivables to his offshore structure for 30% of their value.
4) It then ONLY country tax on that 30%. The rest is collected by the tax-free offshore structure.
5) The physician’s practice continues to collect payments from accounts receivable and remits them to the offshore factor.
Not only are you reducing your tax bill to a husk of its former self, but you’re also protecting the tax-free money you’ve earned. If at any point a patient takes you to court or faces financial hardship, those overseas savings will be incredibly hard to attack. The cash saved can stay abroad earning interest or be invested elsewhere, tax-free.
The most complex part of this deal is setting up the offshore structure, but there are people available who can help you with that and guide you through the entire process.
