What is Money Laundering

Scenario 1:Mr. Big filthy rich. “Filthy” aptly describes his millions stashed away in bank accounts in Caribbean islands, funds derived from drug trafficking, prostitution and other illicit activities. He decided to bring his dirty money home. But how does he legalize it so he will not rouse the suspicions of the authorities? He sets up an offshore company that is engaged in a legitimate business such as venture capital. Through this venture capital company, he invests in a local business back home. His dirty money is thus “sanitized” (laundered), and he can officially enjoy it because it is now seen as profits from the local joint venture.

Scenario 2: Mr. Con obtains a policy for a “phantom” ocean-going vessel. He pays premiums on the policy, and bribes agents to facilitate and pay claims, always making sure his claims are lower than the premiums he pays. This way, the insurer still enjoys a “profit”, and through this process, Mr. Con receives laundered funds from a legitimate and reputable source.

Scenario 3: Mr. Chips takes gamblers on junkets to casinos in Europe, the Philippines and Australia where large sums of money are laundered. His clients don’t have to carry money with them. All they do is to provide him, in local currency, the amount they intend to bring with them to the casinos. He also accepts banker’s cheques. He then informs the casinos of the amount of money deposited with him. On arrival at the casinos, his clients are provided with the amount in gambling chips. Unused chips are exchanged for a cheque from the casinos. Because of Mr. Chip’s casino connection, syndicates make use of his services to launder money in and out of the country.

The money launderer comes in many other guises as well. According to international investigators, these are some of the businesses used to hide dirty cash. Property dealers, photocopying bureau, carpet traders, fairground operators, mobile telephone importers and computer memory chip suppliers.

What is money laundering?

It is a generic term describing the process by which illegally obtained money is transformed into ‘clean’ money that has the appearances of originating from a legitimate source.

The money laundering process is generally made up for three stages:

• The placement stage where illegitimate funds find their way into the financial system via payment into legitimate accounts. For example, depositing cash in banks which ask no questions, investing in deposit taking companies, buying precious metals/diamonds, or artwork/stamp collections.
• The layering stage, which is used to disguise the audit trail between the funds and the original point of entry into the system. Moving the funds around so that the origins of the money become obscured does this. For example, through wire transfer across borders, bonds, “wins” at the race track or regional casinos, and the use of offshore financial centers which either have strict banking secrecy laws or lax regulation.
  
• The integration stage where funds are reintroduced as legitimate wealth to fund further activities or to acquire assets. This includes loans to self/companies and false invoices, and other attempts to make the wealth look honest.

How this relevent with my tax planning blogs, Yes, it relevent with the next topic we discuss, is related to income from internet as well!

Does income derived from Adsense or other internet program need to paid tax?

Does income derived from Adsense or other internet program need to paid tax?
If you are in US, this shall not put into question, since you need furnish the tax reference before payment. They will deduct and inform the authority about your tax position. Do you notice that if you are outside of US, they won’t ask anything? Normally they need to deduct the withholding tax up to 30% before any payment to foreigner (depend double tax treaties sign with any country) In this case meaning they never regard payment to you is US source, they totally ignore you and treat your income as outside source. The system is complex; so do not confuses here, Just want to let all you know there are possible that we need to paid tax for such income.

To determined the tax position, there are some criteria need to determined. (this is universal rules apply to other country as well)

Source of Income
“ The basis of taxation on employment income is that income from exercising an employment in Malaysia is regarded as Malaysian derived income. All income attributable to the employment exercised in Malaysia is subject to Malaysian tax irrespective of where the remuneration is paid. Where an employee is required to perform his duties outside Malaysia, the entire remuneration is still chargeable to Malaysian tax if the services rendered outside Malaysia are regarded as incidental to the Malaysian employment.”
What is the meaning for above statement? Whether the adsense or internet income is created in Malaysia? Or your own country, I believe it is not clear here/. We may do our blog/webside in home, in oversea, any place will possible. So does the income derived from Malaysia source? Yes, the source is Malaysia rce then you need paid tax. If not then no need paid. But if not where is the source of income, USA not recognized as income from their source, so the % is high that you need paid tax.

Dual Employment

“Where an individual has regional responsibilities and performs services for the head office or parent company outside Malaysia under a separate employment, he is regarded as employed by the overseas company in respect of services performed outside Malaysia.
On this basis, that part of the remuneration, which is paid by the overseas company, is not assessable to tax in Malaysia provided that:
It is not charged back to the Malaysian branch or subsidiary directly or indirectly;
It is not received in or remitted into Malaysia; and
The employment with the overseas company is exercised exclusively outside Malaysia. “

On this statement meaning that if your income never remittance back to Malaysia, definitely no issued here, so if your internet income amount is too small, Don’t do remittance. Or one tips you can do here, you can remittance it into Singapore or any nearer country, And keep it for some time, later when go for shopping or traveling then take up the money for use. (you can keep in US if you want ) then no tax problem.Last tips. If you really need paid tax, declare it under business source, for example, if you do a blogs or web for traveling, sure you need cost incurred for transport, hotel…… air tickets. You can off set with the income from advertisement. But remember must reasonable, don’t over claim. I can’t teach you here, unless I got live example. May be you can email me, I will discuss further.

Side income or part time need to paid tax?

Side income or part time income need to paid tax? If you stay in US or any advance country this is stupid question, confirm you need to paid tax ? Each payment will indicate the tax reference no, you can’t run away? Follow the book, I am sure Malaysia and any other under develop country will need to paid so. Since the nature of payment is money.

In practical here is some tips not asking you to avoidance tax (this is illegal), but help you to minimize the impact of tax burden. First we see the income nature. If payment sum is big said 10,000 USD once time or is series of income said each month you will earn USD 500 per month from same source. Then you confirm cannot run away. IRD will detect it from many sources, either by the accounts of your boss or employers or from bank and so on. With Internet database integration, those tax avoidance day is no more honey month for us.

Does anywhere I can reduce it?

Yes, and sure you can. But we need to know how your income created then we will get the answers! Please feel free to email us. Further example.

If you income is from direct sales or insurance, you can classify as business source. Then you can reduce by foods, transport and so on. All this must relevant to business remember the costs to generate income. Don’t simply make a fault statement. It illegal.

If you income is for rental property, then you must know your tenant income nature, if they are businessman or entity, then sure you cannot run away. If the tenant is under employment may be you can escape since they never report in tax form. Please bear in mind if you own a shop lot or factory units. No doubt must paid tax for rental income.

They are many examples we can provide. But need you’re further inform from