Perhaps someone here can help explain at what point does cleverness turn into illegal tax evasion.
Suppose John, a freelancer, makes $100K a year.
John lives in Germany, where he must pay an income tax of 45% for that level of income.
John registers a company in Gibraltar where the corporate tax rate is a mere 10%. His clients pay the company, which in turn pays John a more modest salary of $50K a year, bringing his tax rate down to 30%. He uses the company credit card to spend the other $50K.
Before, John was making $55K a year after taxes. Now, that figure is $75K.
Is this situation illegal? If yes, why?