Tax reduction is always not tax evasion. The U.S. Tax reduction is only applicable when you also move yourself along with your offshore business. It is necessary to have a firm foot in the jurisdiction of your offshore business and should be run by people who live and work there locally. If not it may invite income tax from the U.S. federal Income Tax department every year. Make it an active business outside of the U.S. to save Tax. This will ensure safeguarding from U.S taxes unless there is a dividend that is claimed by the parent company in the U.S. If not, you may end up paying various taxes like branch profits tax at a rate of 30% on the amount of its U.S. earnings after payment of U.S. federal income tax for a combined U.S. tax rate on the company’s U.S. business. Therefore to make the most of this federal law it is best to relocate the business and make it an active business based outside of U.S. To know about setting up an offshore company read more.
For individuals, the FEIE also allows a U.S. citizen to exclude from Income tax if the person is living and working outside of the U.S. The FEIE can be claimed only when you prove that you are permanently or indefinitely working in another Jurisdiction with no definite plans of returning to the U.S.