Many wealthy people are not only able to transfer their money out, but also hide it, and they can also save their taxes sufficiently. Let's talk about this wave of operations today.
99% of the world's countries and territories are both personal and territorial. Territoriality means that as long as a person is within the territory of this country, he must be taxed. Personal means that no matter where a person is, as long as he belongs to a certain country, he must be taxed.
Then there will be a problem, if a foreigner earns money in China, China should tax him, and he brings the money back to his own country and levies another tax on him, which is equivalent to paying taxes twice.
Paying too much tax is not conducive to global investment, so many countries around the world have signed various multilateral agreements. For example, for example, Chinese pay 20% income tax on dividends, while foreigners earn money in China at a personal income tax rate of 10%. Foreigners return to their home countries and pay 10% tax, so this is conducive to global investment.
China is 10% for most countries in the world, but it is 5% for Hong Kong. So Hong Kong companies pay 5% tax on the money they earn on the mainland. However, there are some very special places in the world that belong only to the land and not to the people.
The most famous of these are the British Virgin Islands, the Cayman Islands, and Hong Kong, which are only territories and do not belong to people.
For example, if Little A goes to the BVI to set up a company, the money earned by Company A in the BVI is taxed, but all the money earned when he leaves the island is not taxed.
So he left the island and coined a lofty word called offshore. As long as you don't have to pay taxes on the money you earn on the island, everyone is willing to choose these places to set up a company.
Many people go to the BVI to set up a company A, company A sets up a company B in Hong Kong, and company B holds shares in the mainland company. Why don't you just go to Hong Kong to set up a company?
The biggest advantage of setting up a company in the BVI is that the company law is not perfect and the information is not transparent. Therefore, set up a company in the BVI, then invest in a Hong Kong company, and then use the Hong Kong company to invest in a mainland company.
The Mainland only charges 5% tax to Hong Kong companies, and the transaction takes place in the Mainland, so the BVI is exempt from tax. Doing business in the mainland is normally subject to 20% tax, and only 5% tax is required after one operation. Here's where the next part comes.
When the funds go out, they have to lend money to their own companies. Let their domestic companies issue dollar bonds and borrow from domestic banks.
What are the benefits of doing this?Once the company goes bankrupt and directly applies for overseas protection, if the domestic money cannot be paid, the guarantor, that is, the domestic bank, will have to pay compensation to the overseas creditors, and the overseas creditors will have the boss himself.
So the boss dried up the company, and the company had to pay the boss money. While taking profits from the company, the boss lends money to domestic companies to earn high interest.
The company went bankrupt, and the company had to pay the boss money.