Chereads / Disrupting Hollywood's Timeline / Chapter 69 - Chapter 69: Legal Operations

Chapter 69 - Chapter 69: Legal Operations

At Helen's restaurant, Michael arrived just in time for dinner.

"I heard that Hollywood actresses will do anything to get a role," Tony Koch, Helen's son, asked with curiosity, "Michael, is that true?"

Michael didn't answer directly, only saying, "There are always some people who are bolder."

Tony Koch was a few years older than Michael but far less mature. "Next time you're filming, take me with you to see for myself."

Helen swallowed her food and reminded, "Tony!"

"Mom! In Munich, I'm always dealing with a bunch of old men," Tony complained, "It's so boring."

Michael didn't directly refuse and said, "Tony, you'll have to come to Los Angeles with me."

Tony scratched his head, "Aren't you here in Berlin to make movies?"

"I'm here to handle some movie business," Michael cut a piece of roast meat, put it in his mouth, and savoured it before giving Helen a thumbs-up. "Aunt Helen, your cooking is amazing."

"Thank you," Helen said, looking pleased.

Tony Koch interrupted, "Michael, let's talk about something interesting, like celebrity gossip and secrets."

Michael put down his knife and fork, wiped his mouth with a napkin, and said, "Tony, are you really interested?"

"Yes," Tony nodded emphatically.

Michael laughed, "Start a film company, and you'll know everything soon enough."

Tony Koch shrugged, "I can't run a film company."

Helen thought Michael was joking and said, "Tony works in finance; he hasn't been involved in this industry."

Michael looked at Helen seriously and said, "Aunt Helen, Tony, do you want to start a film company?"

Tony was stunned, but Helen stared at Michael, who was very calm. "This isn't a joke."

"Michael," Tony said, though immature, he wasn't foolish, "Your suggestion is a bit outrageous."

Helen shook her head, "Dear, we don't understand films or how film companies operate; we're complete outsiders."

Michael explained earnestly, "I mean to register a shell film company... By the way, Aunt Helen, you're the legal representative of the meat company, right?"

"Yes," Helen replied.

"Tony can register a film company," Michael said with a smile, "and collaborate with my Seashore Entertainment to legally avoid taxes for you personally and for the meat company."

Helen hadn't been much involved in the film industry but was somewhat interested in legal tax avoidance, "Really?"

Michael said directly, "German tax law stipulates that if personal income and part of corporate income are used for film investment, the tax on this portion of income is exempt."

"I know that," Helen was somewhat familiar with the tax law, "but film investment is a high-risk industry. The money invested could be entirely lost, and I don't understand film operations. Even if I start a film company, I don't know how much tuition I would pay."

Michael reminded, "Aunt Helen, you overlooked that I'm talking about a shell film company. This company doesn't need to set up film projects or actually shoot films."

Helen was perplexed, "I don't quite understand what you mean."

Tony became interested, "If it can legally avoid taxes, opening a shell company is fine. We pay so much tax to the government every year."

Helen glared at her son and asked, "Michael, why don't you start the company yourself? It's easy to start a company in Berlin, whether you're a foreigner or a German."

Michael shook his head, "To legally avoid taxes through film investment, it must be a German company."

Helen thought for a moment and said, "Explain it in detail."

A shell company wouldn't cost much, and Michael seemed quite reliable.

Michael explained carefully, "Aunt Helen, I'm managing two film projects with a total budget of $40 million. If Tony had a film company, I could sell the two projects to Tony for $40 million..."

"Wait," Tony interrupted, "Forty million dollars... Michael, you might as well sell me."

Michael ignored him and continued, "I'll sell the copyrights of the two projects to Tony's company, then lease the films back at an appropriate price, like $25 million or $30 million, to continue my preparations and shooting."

"Huh?" Helen was full of confusion.

"Listen to me," Michael continued, "Aunt Helen, your personal income tax and part of the company's tax are very high every year, right?"

"Yes," Helen nodded slightly.

Michael continued, "According to German tax law, income used for film investment can be exempt from tax, and the investment returns are treated as normal after-tax income, meaning they are tax-free."

Tony said at this point, "I get it. For example, if I receive $1 million in income, according to the tax law, I have to pay the highest personal income tax rate, which is $510,000, and I actually get only $490,000. But if I invest this $1 million in a film, the $1 million I get later from the film income will be tax-free."

Michael had studied many cases and consulted lawyer Mueller in detail, knowing more about this than most Germans.

"Exactly, your $1 million income escapes the tax authorities' grasp," Michael said calmly, "and it's a completely legal method."

Helen, being a businesswoman, said, "It's a legal way to avoid taxes." She shook her head again, "But my personal and company income combined isn't $40 million a year."

Michael said, "Aunt Helen, your friends or partners can also use this method to avoid taxes." He almost patted his chest, "I own a Hollywood production company; you have an advantage others don't."

Helen was seriously considering it.

Michael added, "If Tony's shell company can attract $40 million and then buy the copyrights to my two projects, I can guarantee Tony gets back the $40 million. First, Seashore Entertainment pre-pays $30 million as rental income, and then later, another $10 million as investment returns. Tony won't lose a penny of his $40 million investment."

"It's indeed a good idea," Tony nodded repeatedly, "The tax avoidance alone is worth the company's long-term operating profits."

For any company or high-income individual, taxes are a headache.

Michael added, "Tony if you help so many people legally avoid taxes, a 5% handling fee is not much."

Tony's eyes lit up.

Michael said, "Based on my understanding, German film companies that operate like this usually charge investors 5% to 10% of the total investment amount as handling fees, up to a maximum of 15%."

Tony laughed, "For those who have to pay 30% to 40% tax, that's not much."

"Michael, you didn't come to Berlin just to help Aunt Helen avoid taxes, did you?" Helen suddenly asked.

"Of course not," Michael replied honestly. "I also have benefits."

He said directly, "German tax law has another provision. Film investors can receive a tax refund in advance, even before the film starts shooting. This applies not only to German films but also to foreign films invested in by Germans. The German law doesn't require the film to be shot in Germany or to cooperate with German filmmakers, only that a German film company holds the film's copyright and corresponding dividends."

"I sell the film rights to Tony, which completely complies with the law, and then Tony rents the film rights back to me for 20 or 50 years. After completing the project, I'll buy back the film rights at a symbolic price."

"These two projects transitioning between Seashore Entertainment and Tony's company mean I effectively gain an additional tax refund from the German government. The refund amount is approximately 10% of the film project's estimated revenue, which must have enough actual data to support it and can't be too high."

Helen saw through the essence, "If the tax refund is $10 million, your $40 million can potentially turn into $50 million even before the film starts shooting."

Michael smiled, "It's unlikely to get a full $10 million."

This process required intermediary agents to help get approval, which all cost money. Getting a few million dollars would be good enough.

However, this money was tax refunded and did not need to be included in the income of the two film projects.

Helen picked up her glass, took a slow sip of water, and said, "Are you sure those two projects can get the tax refund?"

Michael replied honestly, "I've hired an intermediary agency that has successfully completed this type of transaction multiple times. There's a 70-80% chance."

Helen put down her glass and said, "I'll seriously consider it."

After dinner, Michael and Tony continued discussing the earlier topic in the living room while Helen went to her study and called her company lawyer. "Hans, I need you to come to my office tomorrow. There's something I need to consult you about."