0

I am 25 years old, from Ireland, and am looking at getting started investing in the stock market.

I’ve started reading Rich Dad Poor Dad.

One of the main pieces of advice given in this book is that you should set up a corporation to protect your wealth.

The main idea behind this is that you should pay your expenses with pre-tax money.

In other words, you pay your expenses (company car, gym memberships, etc.) first, and then you pay tax on whatever is left over.

Currently, the capital gains tax I would pay is 33%, and corporation tax in Ireland is around 12.5%.

I’m wondering is it a better idea / more tax-efficient to set up a corporation in Ireland, and buy my stocks through that rather than a personal brokerage account?

I understand the tax systems are different in both countries, but I'm just wondering if this makes sense.

4
  • 7
    I would be hesitant to follow anything in that book, see the "Criticism" section of the Wikipedia page you linked and Google rebuttals of Kiyosaki.
    – Nosjack
    Feb 27, 2020 at 16:43
  • 8
    Nosjack is correct, throw that book in the trash. Doing what he suggested could be tax fraud and end up with you in jail, or at lease heavy fines. Is that worth it?
    – Pete B.
    Feb 27, 2020 at 16:54
  • 1
    This would be a great question to ask a lawyer or accountant; after all, you'll need one to set up the corporation, so you'll have to find one if you intend to go through with this scheme. Feb 27, 2020 at 17:33
  • 1
    Agree with Eric Lippert; you need an Irish tax adviser. To me it looks like you personally would be paying 33% capital gains tax on your company's worth, on top of the 12.5% that the company pays. But that's assuming that it's still a capital gains tax - some countries tax capital gains as regular income when you're trading professionally.
    – MSalters
    Feb 28, 2020 at 10:57

1 Answer 1

7

To put this in perspective: you can certainly set up a corporation and then pass legitimate business expenses related to the operation of that corporation through it in the manner you're describing. Or take whatever other steps are needed in your specific jurisdiction in order to take advantage of tax breaks for legitimate business expenses. In a sense, that is good advice. It doesn't make sense to leave money on the table by paying taxes on things (business expenses, in this case) you can legitimately pay pre-tax.

But there's a subtle point to be made here, which has a significant and critically important impact: you can't literally live your entire personal life under the auspices of operating a corporation, and push all of your personal expenses through the corporation's books as a way to avoid taxes. Doing so is, literally, tax fraud in most jurisdictions and would be illegal.

2
  • Are you sure that setting up a corporation is even necessary to claim legitimate expenses in Ireland? Even that light-praise of the content of the book given the OP's different jurisdiction may be misleading. Otherwise really good answer. Feb 27, 2020 at 17:36
  • @Grade'Eh'Bacon - Thanks for the feedback. I don't know and was attempting to be generic versus answering relative to specific tax code in a given jurisdiction, because I felt the overriding message was more important than the jurisdiction-specific focus - but I'll make a minor edit to make that a little more clear.
    – dwizum
    Feb 27, 2020 at 17:40

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .