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  # 1335723 2-Jul-2015 13:34
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+1

Do not trust any financial or legal advice from an internet forum.

Also - be very wary of offering financial or legal advice on an internet forum.

You are talking tens of thousands of dollars - your friend needs to get sound advice from a qualified professional to ensure he is not suddenly hit with a tax bill for thousands (as if there is some liability you can guarantee that it will be back dated, then interest charged).

Good luck!

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  # 1335736 2-Jul-2015 13:48
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I've had EXACTLY this question asked by a colleague. He is Iraqi and he wants to receive payment for his online services by Visa or Mastercard but there are no Iraqi payment gateways. He wants to have my colleague run a Paypal account in NZ on his behalf and then remit to him or even DPS/Payment Express.

I see no reason for this to not work and is a great idea.

Running this through a company is probably best. You do need a local director now so I would ask your friend to setup a company with him as the director but you as the shareholder. You will find it easier to get DPS accounts etc. (DPS may be better than fees than Paypal unless you specifically need paypal).

Remember incoming in this situation is profit. Since you would invoice your friend for your service which he subsequently pays for (or something to that effect) he is making no profit and thus no taxable income.

I'm not a tax lawyer but have I would say a relatively good knowledge in this field based on commercial experience and the work we do (and the fact we are looking to go multi national yikes!).





 
 
 
 


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  # 1335738 2-Jul-2015 13:49
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nakedmolerat: Your friend is in dangerous territory. He will need to explain this extra income and pay tax on it etc.

With that kind of money, it is BETTER to have a front company here in NZ.

You don't have to pay GST if it is under $60k a year and if you do not charge GST in your price.

The company is however required to pay income tax on it.

Get your friend to find someone and talk about setting up a business front here.


I disagree completely. Also remember GST is not required on exports but if your revenue is above the threshold you may still need to register and just return $0 returns.





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  # 1335774 2-Jul-2015 14:14
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What you are talking about is called money laundering and that is a crime here in New Zealand and in most other countries in the world.

I fully understand that you may associate money laundering with organised crime, drug dealing, terrorism etc and that you may be earning this money legally and that you may be paying all required taxes but that does not get around the fact that this is money laundering.

If a bank in NZ sees an unusual transaction for a sum of more that $NZ10,000 then they are required by law to report that to the authorities as potential money laundering.

You are now reading this and thinking that you are OK as no single amount is over $NZ4,000.

Wrong. You need to read the wikiP page on structuring. [url=https://en.wikipedia.org/wiki/Structuring]

The transfers that you are proposing will be detected as an attempt at structuring and the bank must also report this to the authorities. You can rely on that happening, the law says that banks must report it and they can be fined a lot of money if they do not so they are sure to report.

Structuring itself is a crime. Even if all money involved is legit and all taxes are being paid, your friend would be guilty of structuring and could be prosecuted.

If prosecuted, there would be no defence available to him. The best that he could hope for would be to claim that no harm had been done, all taxes had been paid and the money was all clean and legal. That might get him a lighter punishment or even a discharge without conviction but it would still be a nasty process to go through.

He could also be done for tax evasion if the IRD decided that it was his money and that he was trying to hide it away in another country. In that case, the onus of proof would not be on the IRD to show that it was your friend's money. If would be up to your friend to prove in a New Zealand court that it was your money all along and that you were paying all due taxes in other countries.

I expect that most people who read this will be outraged about the fact that this would be considered to be money laundering and that the law around structuring is as rigid as it is but that is the law that our government has signed up to.


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  # 1335806 2-Jul-2015 14:49
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jpoc: What you are talking about is called money laundering and that is a crime here in New Zealand and in most other countries in the world.




I think you are quite wrong. Under your definition I am a money launderer and should be thrown into jail for the rest of my life even though my money is legitimate and full taxes paid. 

Also, all of our banks are illegal too then.

And, there is no way this is tax evasion if the facts presented are correct.   A paper trail would be required for evidence, of course .

gzt

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  # 1335807 2-Jul-2015 14:49
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The linked article talks about evasion of record keeping requirements. What requirements are being evaded by the proposed practice? It also talks about parcelling but that is not the case in this proposal. Im sure you know what you are talking about due to previous posts but I don't understand this yet.

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  # 1335813 2-Jul-2015 14:51
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In fact, if you are right then anyone with a foreign agent is guilty of money laundering.   Using an agent is a really common structure so i'm a bit surprised. 

 
 
 
 


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  # 1335987 2-Jul-2015 18:01
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surfisup1000:
jpoc: What you are talking about is called money laundering and that is a crime here in New Zealand and in most other countries in the world.




I think you are quite wrong. Under your definition I am a money launderer and should be thrown into jail for the rest of my life even though my money is legitimate and full taxes paid. 

Also, all of our banks are illegal too then.

And, there is no way this is tax evasion if the facts presented are correct.   A paper trail would be required for evidence, of course .


You would have to explain what you are doing that would make you a money launderer.

Our banks are not illegal because they are covered and governed by the money laundering laws.

Banks can transfer money around because they have licences that are granted to them on the condition that they obey certain rules. The main rules are that they must report any transaction or group of transactions that exceed money laundering limits or which might involve structuring. Paypal are also subject to those rules as are Western Union and anyone else involved in transferring money around or exchanging money. If you have any knowledge of Bitcoin and similar crypto-currencies, you will be aware that there have been many struggles between authorities and exchanges that allow people to exchange traditional money and Bitcoins. These are resolved when the authorities and the exchanges work out how they can be brought into compliance with the money laundering rules.

I agree with you that, as described, there is no tax evasion in New Zealand but I am sure that the IRD will be suspicious and want to see proof when they find out about the transactions. If they are not satisfied by the initial explanation then they will start a case against the person transmitting the money.

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  # 1335989 2-Jul-2015 18:10
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gzt: The linked article talks about evasion of record keeping requirements. What requirements are being evaded by the proposed practice? It also talks about parcelling but that is not the case in this proposal. Im sure you know what you are talking about due to previous posts but I don't understand this yet.


The requirements are that all transfers that exceed the money laundering limits are reported to the authorities. If A makes three four thousand dollar transfers to B, instead of a single twelve thousand dollar transfer then that will evade the anti money laundering reporting requirements.

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  # 1336309 3-Jul-2015 11:12
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jpoc: What you are talking about is called money laundering and that is a crime here in New Zealand and in most other countries in the world.

I don't think this is money laundering.  Here are a couple of definitions from reputable sources:

 

  • "any act or attempted act to conceal or disguise the identity of illegally obtained proceeds so that they appear to have originated from legitimate sources"
    Interpol
  • "the process by which criminals disguise the original ownership and control of the proceeds of criminal conduct by making such proceeds appear to have derived from a legitimate source"
    International Compliance Organisation
We don't know what business the OP is in so we don't know whether it is "illegal" or involves "criminal conduct".  If it does then this is certainly money laundering and the New Zealand-based intermediary should stay well out of it (so should the OP, but that's not the question asked in this thread!).

For now, let's assume the business is legal, honest and all above board.  The local guy will need to talk to an accountant who specialises in tax law regarding the payments deposited into his account.  Even if he transfers 100% of what he receives back out of his account, he will have to get advice as to whether this is taxable, as he will be paying income tax, not profit tax, so needs to know whether the New Zealand Inland Revenue Department will see these transactions as income.  And of course, if he is making any money out of this venture (e.g. you are letting him keep 5% or paying him $XX/per transaction for his trouble) then this will definately be taxable.

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