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Some of friends at Bangladesh work with clients from USA, and they often face problems in getting paid. They are suggesting a business plan to me.

  • I would create a Xoom/Paypal account.
  • It will be backed by my credit card. The US clients will send directly to my CC, and then I will transfer that to Bangladeshi local bank after deducting the transfer fees.

But the problem is, my CC will record the transactions, and those transfers will be considered as my income from the legal perspective, right? At the end of the day, I will not earn much, but the transactions will just burden my tax returns. Am I missing something here? I don't want to pay the taxes for other guy's income. Also, is it legal? Please suggest. I am living in Canada.

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    There are a lot of good reasons not to do this. Money transfer businesses are regulated (regulations that are expensive and onerous to comply with) and carry risk. You'd be stuck in the middle in case anything goes wrong or there are any disputes. If a payment is subsequently cancelled or withdrawn for any reason, you'd be out the money. – Zach Lipton Mar 5 '16 at 7:31
  • What are the problems causing them not to get paid by US clients? – TTT Mar 5 '16 at 14:04
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As soon as I see the word "friends" along with money transfer I think scam. But ignoring that red flag....

You will have American companies reporting to the IRS that you are a Canadian Vendor they have hired. Then you are transferring money to people in Bangladesh.

Assuming also that you fill out all the regulatory paperwork to establish this Money transfer business you may still face annual reporting requirements to 3 national taxing authorities.

In the United states there are situations where the US Government hires a large company to complete a project. As part of that contract they require the large company to hire small businesses to complete some of the tasks. In a situation where the large company is imply serving as a conduit for the money between the government and the sub-contractor; and the large company has no other responsibilities; the usual fee for providing that function is 8% of the funds. This pays for their expenses for their accounting functions plus profit and the taxes that will trigger.

Yet you said "At the end of the day, I will not earn much, but the transactions will just burden my tax returns." The 8 percent fee doesn't include doesn't include having to file paperwork with 3 nations.

Adding this to all the other risks associated with being an international bank, plus the legal costs of making sure you are following all the regulations...No thanks.

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