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Marcos and the Kraemer & Kraemer Team (offshore legal)

Source: Notion | Last edited: 2024-01-04 | ID: e6572336-797...

Hello Marcos and the Kraemer & Kraemer Team,

I discovered your team via Browsing version of GPT-4 and I saw your YouTube channel interview (“SMITHWEEKLY RESEARCH”) and was impressed by the abundance of valuable content on your website. It resonates well with our team’s commitment to leveraging social media and promoting transparency.

I am writing to you in my capacity as the Director of Operations at Eon Labs Ltd., a fintech firm headquartered in Vancouver, BC, Canada. Our primary business involves developing machine learning models for algorithmic trading of futures contracts available on Binance. We execute trades on the Binance exchange both for our own investment and on behalf of institutional clients, who in turn compensate us through a software licensing fee (i.e. technology fee or performance fee).

The intellectual property rights for these machine learning models are held by Eon Labs Ltd.

We are in the process of considering licensing these intellectual properties to an offshore entity. This consideration is primarily driven by regulatory constraints in Canada, which prohibit trading in crypto futures contract accounts (CFCA) on Binance. Binance allows account openings for futures contract trading from specific jurisdictions, and we are interested in Panama or some other recommended jurisdiction to establish an entity for this purpose.

For the purpose of this discussion, we will consider the following scenarios:

  • Binance permits our newly registered entity, situated in the selected jurisdiction, to open a futures contract trading account.

  • Eon Labs Ltd.’s stakeholders (Chen Li and Victor Hogrefe) plan to set up this new entity in the selected jurisdiction specifically for Binance trading.

  • Please note that Victor Hogrefe holds a minority stake in Eon Labs Ltd., i.e., less than 5% of shares.

  • The profits gleaned from futures contract trading on Binance would be received by the offshore entity in the form of a crypto stablecoin, specifically USD Tether (“USDT”).

  • The said offshore entity can pay a software license fee in USD Tether to Eon Labs Ltd. based in Canada.

  • The said offshore entity can pay a software contracting and retaining fee in USD Tether to Eon Labs Ltd. based in Canada. We would appreciate your expert stance on the subsequent points, considering the aforementioned assumptions:

  • What type of restructuring would you recommend (e.g., Trust, Foundation, Spin-off & Licensing Unit, or 3rd Party Management Company) via our business group’s Special Purpose Entity (SPE), to ensure Base Erosion and Profit Shifting (BEPS) does not raise concern for both offshore and Canadian tax authorities, such as under CRA’s General Anti-Avoidance Rule (GAAR)?

  • What are the necessary procedures and costs associated with setting up everything?

  • What are the annual operating costs entailed in maintaining such a structure?

  • What is the extent of documentation burden required (both for setup and ongoing maintenance)?

  • What are the transfer pricing risks, and how can they be mitigated?

  • Is there a need to establish Arm’s Length Pricing procedures?

  • What are the measures of preventing the Piercing the Corporate Veil? We’re also uncertain about our Canadian tax implications—such as withholding tax—should we move intellectual property (i.e. the algo-trading software) and cryptocurrency assets from our Canadian entity to a Panamanian structure, assuming it consists of a PPIF and an IBC. Would you mind shed some light on this?

Your timely and comprehensive guidance on these matters would be invaluable to us.

Thank you for considering our request. We look forward to your prompt response.