Get to know “Paper Company” A Tax Avoidance Technique for Businessman

Currently, there are many loopholes to avoid tax. Paper Company is another loophole that businessmen use as a means of tax avoidance. What is a Paper Company? ACU PAY will take you to find out about this together.

What is a Paper Company?

Paper Company is a legal registration of a company. However, the company does not have real business operations such as registration of a company, but the company does not exist, has no location, no employees, and no income generation.

Are you curious why this nonexistent corporation was established …

What is the purpose of establishing a Paper Company?

It is because in some countries there are progressive taxes, or taxes on high-profit corporations may make the companies pay more taxes than they normally do. The company will move the money to the Paper company to the lower taxable country so that when the tax is due, taxes will be paid at the rate of the country where the money was moved.

Paper company has advantages regarding tax breaks, but this is wrong because sometimes companies do this to launder money or hide money for tax evasion, and sometimes the illegal money can be a financial path that can be hidden.

The example of Paper Companies

Many large American companies have done this such as Goldman Sachs Group, Morgan Stanley, and Berkshire Hathaway, including Starbucks, and Tesla, which brings the money into the paper company as a shelter for tax purposes, because large corporations will have large profits and pay high taxes.

In the personal category, it is sometimes used as a name for possessing high-value assets such as paintings, real estate, ships, and property to conceal the real owner because those goods may not be legal.

Countries where Paper company registration is very high will be low-tax countries such as the British Virgin Islands, where most people and billionaires like to deposit money there. Now, the islands are blacklisted because their laws allow for tax evasion. Another country is the Cayman Islands, which are considered tax-free because no corporate tax is collected, so most people deposit their money here for tax evasion.

Is Paper Company illegal?

Whether or not this registration is illegal may depend on the founder’s intention. If the company registers the Paper company to organize the assets into company money, not personal, that is not wrong.

Nevertheless, if the intentions of the use are for fraud and tax avoidance, as well as for money laundering, this becomes a loophole and gray action that most investors tend to use in the wrong way.

References from
techsauce / longtungirl