Struggling to choose the Best Offshore Set up: Help

[banafinfodafuggiano]

I'm very undecided about the following 4x set ups, if anyone can highlight something I'm missing and if you can offer
any alternative, it would be great:


- US LLC: Hard to open a bank account, and not many EMIs available when the director is a non-resident. Stripe and PayPal also create problems.
- Hong Kong: Everything is good except there is a provisional tax to pay each year, for the subsequent year: How hard is it to apply for the Offshore Tax Exemption???
- Singapore: Some people say your corporate income is taxed, some say it's not, I'm referring to income sourced and remitted ouside of Singapore.
- UAE: Have to fly there once every 6 months , a bit of a pain in the butt, doesn't support Wise and other payment gateways...
- Ireland: everything perfect except if there is no substance in Ireland, they will tax you the full corporate rate.


I run an ecommerce multi-business making low 7 figures a year in revenue.
my clients are based across the world (EU/USA/UK/AU/CA/NZ/South America).
I prefer to incorporate in aa jurisdiction that is white listed, accepted by all EMIs and all payment gateways such as Stripe and Paypal
and that it doesn't have a public register on GOOGLE (like the UK does).

 

[thomasparra]

There are couple factors to consider:

- objectives (eg pay low or no tax? access to quality EMIs/payment processors given your e-commerce business)
- where are you tax resident of and are you willing to move?
- what does your profit and growth potential looks like when it comes to revenue and especially profit.

For instance, HK only taxes you 8.25% up to 255k USD in CIT, you are looking at 12-13% effective in SG which represents a 45% increase for the same level of profit. Offshore tax exemption is harder and harder to get in HK, and they enacted new regulations to make it even harder recently, to please the EU. I cannot speak to SG, but even assuming they still allow some offshore income revenue exemptions, it will likely become more difficult there in the near future too.

 

[banafinfodafuggiano]

There are couple factors to consider:

- objectives (eg pay low or no tax? access to quality EMIs/payment processors given your e-commerce business)
- where are you tax resident of and are you willing to move?
- what does your profit and growth potential looks like when it comes to revenue and especially profit.

For instance, HK only taxes you 8.25% up to 255k USD in CIT, you are looking at 12-13% effective in SG which represents a 45% increase for the same level of profit. Offshore tax exemption is harder and harder to get in HK, and they enacted new regulations to make it even harder recently, to please the EU. I cannot speak to SG, but even assuming they still allow some offshore income revenue exemptions, it will likely become more difficult there in the near future too.

1. Pay low to no corporate tax, ideally less than 12%.
2. I'm working on becoming a Tax resident of Malasya.
3. Right now it's very well capped at (USD 200,000 to 300,000 a year in profits), struggling to increase it further

 

[GerhardStrasser]

I'm very undecided about the following 4x set ups, if anyone can highlight something I'm missing and if you can offer
any alternative, it would be great:


- US LLC: Hard to open a bank account, and not many EMIs available when the director is a non-resident. Stripe and PayPal also create problems.
- Hong Kong: Everything is good except there is a provisional tax to pay each year, for the subsequent year: How hard is it to apply for the Offshore Tax Exemption???
- Singapore: Some people say your corporate income is taxed, some say it's not, I'm referring to income sourced and remitted ouside of Singapore.
- UAE: Have to fly there once every 6 months , a bit of a pain in the butt, doesn't support Wise and other payment gateways...
- Ireland: everything perfect except if there is no substance in Ireland, they will tax you the full corporate rate.


I run an ecommerce multi-business making low 7 figures a year in revenue.
my clients are based across the world (EU/USA/UK/AU/CA/NZ/South America).
I prefer to incorporate in aa jurisdiction that is white listed, accepted by all EMIs and all payment gateways such as Stripe and Paypal
and that it doesn't have a public register on GOOGLE (like the UK does).

UAE: As a shareholder you can go for an investor visa (+ AED 1,000) and you have to go there only every 12 months.

Top Payment Gateways for the UAE Market

• Telr. Established in 2014, Telr, the UAE-based award-winning payment gateway, offers a unique platform that enables handling payments in over 120 currencies & 30 languages with the highest level of security in The UAE & KSA. ...
• Stripe. ...
• PayTabs. ...
• 2Checkout. ...
• Checkout.com.

 

[banafinfodafuggiano]

UAE: As a shareholder you can go for an investor visa (+ AED 1,000) and you have to go there only every 12 months.

Top Payment Gateways for the UAE Market

• Telr. Established in 2014, Telr, the UAE-based award-winning payment gateway, offers a unique platform that enables handling payments in over 120 currencies & 30 languages with the highest level of security in The UAE & KSA. ...
• Stripe. ...
• PayTabs. ...
• 2Checkout. ...
• Checkout.com.

Very hard to get 2checkout, checkout.com, etc.. even with a UK or German company. Let alone with a UAE company... impossible... Also, it seems like many EMIs don't work with UAE businesses anymore.

 

[Sols]

Very hard to get 2checkout, checkout.com, etc.. even with a UK or German company. Let alone with a UAE company... impossible...

AFAIK, it's not impossible to, just difficult, with Checkout.com.

Stripe, Telr, and PayTabs are easier to work with for UAE businesses.

Also, it seems like many EMIs don't work with UAE businesses anymore.

EMIs left UAE because of regulatory changes in UAE and because UAE is currently on FATF and EU warning lists.

2. I'm working on becoming a Tax resident of Malasya.

If you factor in everything: costs of incorporation, maintenance, currency exchange, salaries to establish substance, banking woes, cross-border movement of funds, and so on — would it really be that bad to just form a company in Malaysia instead since that's where you'll be living?

The headline tax rate is 24% but there are incentives for MSMEs with tax rates of 15% and 17%. IIRC, there is no further tax if you pay yourself dividends. The dividends are considered taxed by the corporate tax rate and there's no WHT. There were some changes in 2023, though, so double check.

Labuan is also an option, although can be a little complicated if live in Malaysia but not on the island of Labuan.

Banking is generally OK to high quality in Malaysia and Labuan.

 

[thomasparra]

AFAIK, it's not impossible to, just difficult, with Checkout.com.

Stripe, Telr, and PayTabs are easier to work with for UAE businesses.


EMIs left UAE because of regulatory changes in UAE and because UAE is currently on FATF and EU warning lists.


If you factor in everything: costs of incorporation, maintenance, currency exchange, salaries to establish substance, banking woes, cross-border movement of funds, and so on — would it really be that bad to just form a company in Malaysia instead since that's where you'll be living?

The headline tax rate is 24% but there are incentives for MSMEs with tax rates of 15% and 17%. IIRC, there is no further tax if you pay yourself dividends. The dividends are considered taxed by the corporate tax rate and there's no WHT. There were some changes in 2023, though, so double check.

Labuan is also an option, although can be a little complicated if live in Malaysia but not on the island of Labuan.

Banking is generally OK to high quality in Malaysia and Labuan.

Unrelated to the topic but why did HK was put on the list on EU "grey list" which is officially 'cooperative juridiction with pending commitment" for offshore tax exemption while SG hasn't been affected? Aren't both territorial and offshore exemption regimes (very) similar in nature?

 

[Sols]

Unrelated to the topic but why did HK was put on the list on EU "grey list" which is officially 'cooperative juridiction with pending commitment" for offshore tax exemption while SG hasn't been affected? Aren't both territorial and offshore exemption regimes (very) similar in nature?

Singapore's problem was never so much about tax evasion as it was about banking secrecy. There was a time — before FATCA and CRS — where Singapore had a nearly impenetrable banking secrecy. Even with TIEAs, it was almost impossible to get information out of Singaporean banks. It faced a lot of criticism for this and ended up changing its laws, so that it can now comply with TIEA, CRS, and FATCA, making Singapore more cooperative. That greatly improved Singapore's standing in the eyes of regulators.

The IRD in Hong Kong used to be very lenient with issuing exemptions. In contrast, Singapore's tax system has always been stricter and more difficult to abuse. It's not a pure territorial system. While tax evasion through Singaporean companies certainly did and still does happen, it never reached the scale of Hong Kong. At leat insofar as these things can be measured and quantified.

 

[banafinfodafuggiano]

Singapore's problem was never so much about tax evasion as it was about banking secrecy. There was a time — before FATCA and CRS — where Singapore had a nearly impenetrable banking secrecy. Even with TIEAs, it was almost impossible to get information out of Singaporean banks. It faced a lot of criticism for this and ended up changing its laws, so that it can now comply with TIEA, CRS, and FATCA, making Singapore more cooperative. That greatly improved Singapore's standing in the eyes of regulators.

The IRD in Hong Kong used to be very lenient with issuing exemptions. In contrast, Singapore's tax system has always been stricter and more difficult to abuse. It's not a pure territorial system. While tax evasion through Singaporean companies certainly did and still does happen, it never reached the scale of Hong Kong. At leat insofar as these things can be measured and quantified.

Are you saying it's easy to get a Offshore Tax exemption status for Hong Kong companies?

I heard it's hard and it requires patience (over 18 months of waiting) and need to keep track record of every single little and big payments, invoices, etc... (a pain)

 

[JohnnyDoe]

- US LLC: Hard to open a bank account, and not many EMIs available when the director is a non-resident. Stripe and PayPal also create problems.

I operate 5 different LLCs, all with bank accounts, stripe and PayPal, without being a U.S. person. I never had any issue.

 

[Sols]

Are you saying it's easy to get a Offshore Tax exemption status for Hong Kong companies?

It used to be easier. In recent years, the scope of what qualifies for tax exemption has shrunk.

I heard it's hard and it requires patience (over 18 months of waiting) and

Never heard of it taking that long. That sounds like an extreme outlier.

need to keep track record of every single little and big payments, invoices, etc... (a pain)

If you're not doing that already or aren't going to start doing it, Hong Kong isn't a good fit for your business.

 

[thomasparra]

Singapore's problem was never so much about tax evasion as it was about banking secrecy. There was a time — before FATCA and CRS — where Singapore had a nearly impenetrable banking secrecy. Even with TIEAs, it was almost impossible to get information out of Singaporean banks. It faced a lot of criticism for this and ended up changing its laws, so that it can now comply with TIEA, CRS, and FATCA, making Singapore more cooperative. That greatly improved Singapore's standing in the eyes of regulators.

The IRD in Hong Kong used to be very lenient with issuing exemptions. In contrast, Singapore's tax system has always been stricter and more difficult to abuse. It's not a pure territorial system. While tax evasion through Singaporean companies certainly did and still does happen, it never reached the scale of Hong Kong. At leat insofar as these things can be measured and quantified.

Interesting, thanks very much for the input. We might see if similar approaches are deployed by SG. HK also mentions that they hope the EU to adopt a consistent and egalitarian approach when dealing with other juridictions (ie SG)

The proposed taxation of gains from sale or disposal of foreign assets in Singapore is to align the tax treatment of such gains in Singapore with the latest guidance on FSIE regime issued by the European Union (EU). This effectively means that with effect from 1 January 2024, such gains received in Singapore may be taxable in Singapore even if they are capital in nature.

In Hong Kong, the consultation period for expanding the FSIE regime to cover foreign-sourced gains from disposal of assets ended on 6 June 2023. It is expected that the HKSAR Government will take into account the feedback received during the consultation in its further discussion with the EU before it introduces an amendment bill into the Legislative Council in October 2023.

We recommend that in discussing with the EU and the upcoming legislative process, the HKSAR Government also takes note of Singapore’s proposed legislation as discussed above and ensure that the proposed expanded FSIE regime in Hong Kong would not make Hong Kong in a less competitive position.

Notably, the proposed legislation in Singapore suggests that business expenditure incurred by an in-scope entity both within and outside Singapore will be taken into account when assessing the reasonableness of the ES in Singapore. The HKSAR Government should explore whether the same approach could be taken in Hong Kong as under the current FSIE regime, only operating expenditure incurred in Hong Kong will be counted towards the ES in Hong Kong. Another point to note is the proposed legislation in Singapore clearly set out the rules of determining the locations of different types of assets for the purpose of ascertaining whether an asset is a foreign asset. This would enhance certainty for taxpayers on whether an asset disposal gain is within scope or not.

The proposed expansion of the FSIE regime in Hong Kong to cover asset disposal gains represents another fundamental change to the Hong Kong tax system. Business groups in Hong Kong should closely monitor any future developments in this area and make use of any future opportunities to express their views or suggestions on such change to the government.

Are you saying it's easy to get a Offshore Tax exemption status for Hong Kong companies?

I heard it's hard and it requires patience (over 18 months of waiting) and need to keep track record of every single little and big payments, invoices, etc... (a pain)

I am surprised that you are running a 7-figure business and complain about handling basic accounting practices? Regardless of where you go this is the most important thing to do. You are in for a lot of problems if you don't produce and keep proper documentation. Of course this does not apply if your business is a street food cart in a third world country.

 

[JackAlabama]

Unrelated to the topic but why did HK was put on the list on EU "grey list" which is officially 'cooperative juridiction with pending commitment" for offshore tax exemption while SG hasn't been affected? Aren't both territorial and offshore exemption regimes (very) similar in nature?

Its purely political.
These shitlists have no foundations, are completely arbitrarily and should be disregarded.
Funny enough countries still let themselves intimidate and fool by the broke eu with their worthless currency.

If you depend on countries not being on these lists, change your structure accordingly. They can have big impacts depending on what you do.

 

[jafo]

Its purely political.
These shitlists have no foundations, are completely arbitrarily and should be disregarded.
Funny enough countries still let themselves intimidate and fool by the broke eu with their worthless currency.

This! 100% this!

 

[Choosing7269]

I operate 5 different LLCs, all with bank accounts, stripe and PayPal, without being a U.S. person. I never had any issue.

Local director? Visit to US? Any hints are appreciated.

 

[Cloudbanck]

Local director? Visit to US? Any hints are appreciated.

Im not JohnnyDoe, but my experience of operating US LLCs is that banking is quite straightforward. Opened a bunch of accounts with US EMIs (that typically do require you to have US customers) and non-US EMIs. There is a whole thread about it here I tried opening a US business account in 18 EMIs, here's the result
Non-US EMIs that offer accounts to US LLCs include: Wise, Airwallex, Zen

No need for a local director, nor any visits to the US. You do need a US-based registered agent though, but thats like 140 USD a year (and can be a friend living in the US), and you need to file forms 1120 and 5472 to the IRS every year where you tell them where you live and how much money you put in or took out of the LLC. Notably no need to tell the IRS how much profit you made, and of course no taxes.
And since this year you also (probably - there is a court case that might stop it) need to file details about the beneficial owner with Fincen.

 

[EliasIT]

No need for a local director, nor any visits to the US. You do need a US-based registered agent though, but thats like 140 USD a year (and can be a friend living in the US), and you need to file forms 1120 and 5472 to the IRS every year where you tell them where you live and how much money you put in or took out of the LLC. Notably no need to tell the IRS how much profit you made, and of course no taxes.

Is it difficult to get these forms completed yourself or better find a professional to help you?

 

[Cloudbanck]

Is it difficult to get these forms completed yourself or better find a professional to help you?

5472 is somewhat tricky. I got professional help the first year, and then did it myself after that.
An annoying thing is that you cant file the forms online or email them to the IRS. They have to be sent by post or faxed.
There is no real functioning postal service where I live, so I use a US based online service that faxes documents to anywhere you want.

 

[daniels27]

What number have you faxed to? The U
IRS website lists a fax number but not for filing.

https://www.irs.gov/instructions/i1120#en_US_2023_publink100014020
The fax above is only for electronic filing waivers.

Have they accepted the faxed return? I would be very cautious as the fine is 25000 per 5472 form. You have one first time abatement but still.

 

[Cloudbanck]

What number have you faxed to? The U
IRS website lists a fax number but not for filing.

https://www.irs.gov/instructions/i1120#en_US_2023_publink100014020
The fax above is only for electronic filing waivers.

Have they accepted the faxed return? I would be very cautious as the fine is 25000 per 5472 form. You have one first time abatement but still.

See here, in the instructions for 5472, and no they don't send any confirmation back that they have accepted the letter/fax: Instructions for Form 5472 (01/2024) | Internal Revenue Service :

"When and Where To File​

File Form 5472 as an attachment to the reporting corporation's income tax return by the due date (including extensions) of that return.

Foreign-owned U.S. DEs.

While a foreign-owned U.S. DE has no income tax return filing requirement, as a result of final regulations under section 6038A, it will now be required to file a pro forma Form 1120 with Form 5472 attached by the due date (including extensions) of that Form 1120. [...]

Dedicated mailing address.​

Foreign-owned U.S. DEs are required to use the following dedicated mailing address. These filers do not use the mailing address provided in the Instructions for Form 1120.

Note.​

“Foreign-owned U.S. DE” should be written across the top of the Form 1120. File these forms by:

• Fax (300 DPI or higher) to 855-887-7737, or
• Mail to:

Internal Revenue Service
1973 Rulon White Blvd
M/S 6112 Attn: PIN Unit
Ogden, UT 84201"