BVI substance sofware development

[EliasIT]

I am asking about being a digital nomad how would

sorry, missed that point - Anyway it may help one or the other.

 

[agentsriba]

Yes, you incorporat in Singapore, file annual returns there and then you pay out all the profits as dividends when you need the money.

You will need to have a resident nominee director, which is not you. You will be the director and you must comply with all country regulations so that you do not become tax resident with your company anywhere. Then, it is completely legal.

You can also do BVI instead of Singapore, you may have a much harder time to get a bank account and maybe issues with your clients. But that's about it. No ES required unless you transact with other companies you own.

My clients will be Web3 companies. They are mostly incorporated in places similar to BVI. I would mostly get payments using cryptocurrencies. I can pay myself cryptocurrency dividends but what about cashing them out as a natural person. Where do I have to get a bank account so I do not become a tax resident somewhere? My home country may say that I am still a tax resident there just because I have a bank account there no?

 

[daniels27]

My clients will be Web3 companies. They are mostly incorporated in places similar to BVI. I would mostly get payments using cryptocurrencies. I can pay myself cryptocurrency dividends but what about cashing them out as a natural person. Where do I have to get a bank account so I do not become a tax resident somewhere? My home country may say that I am still a tax resident there just because I have a bank account there no?

Generally bank account to not create any nexus, especially as you are entitled bank accounts in all EU countries as EU resident, regardless of nationality.

Yes, in this case the places there are good. Check with your mates, there are jurisdictions more open to crypto than others.

You can open any bank account anywhere, just make sure the bank is open to crypto. There are quite some discussions in this forum here, check out those.

 

[agentsriba]

I was going to write something similar to you. I have personal experience with the tax authorities in Denmark, as many others here do have in other coutnries. Since 2020, perhaps even earlier, the tax offices have been granted the authority to act as both judge and prosecutor at the same time. They have also been given immense power that ordinary people simply cannot contend with.

You can spend 100K euros on lawyers and accountants to shed light on a case, and yet they still fabricate stories as they see fit or ignore what countless hours have been spent demonstrating, not to mention the thousands that go to advisors.

I can only warn you: the tax authorities are the real bandits and criminals. The times have changed - it’s no longer them chasing criminals, but rather criminals chasing innocent people.

So, OP, think carefully about what you're doing to save a few hundred euros in taxes. And if you proceed, make sure you do it properly.

Hey, is there a way you can dm me?

 

[agentsriba]

If the other company connected to you? Like same owner or your brother?

If yes, you either relocate there or look for a company elsewhere.

If no, read below as you won't be subject to es rules.

What if the company hires a contractor to do part of the software development. For example. My company gets hired to do a website. And then I outsource that work to a contractor. How do things work with intellectual property? Will that be qualified as an IP business. From my point of view in the contract for hiring the contractor IP will be transferred to my company and then my company will transfer it to the client.

 

[Simon4466]

What if the company hires a contractor to do part of the software development. For example. My company gets hired to do a website. And then I outsource that work to a contractor. How do things work with intellectual property? Will that be qualified as an IP business.

How could that be seen as an IP business? Where is the IP?

 

[agentsriba]

How could that be seen as an IP business? Where is the IP?

The source code of the website won’t be qualified as IP?

 

[Simon4466]

No maybe if you had an outsourcing business and you franchise it and ask for money for the IP in a franchise agreement, pretty sure the tax people in your country won't be that stupid

 

[daniels27]

The source code of the website won’t be qualified as IP?

What is the question about here? The rules for Economic Substance are like this:
1. You cannot use a BVI company to shift profits from another company to the BVI.
2. If you still want to do this, you need to prove that the relevant work is actually done in the BVI.

The question should be how to ensure it does NOT qualify as IP. For any IP transaction there are MORE rules to follow.

Long story short, if you do not transact with companies belonging to the same person or their brother, father, wife, kids or close friends, you just invoice a service and you are fine and do NOT need to follow any economic substance rule.

Short story long, you cannot claim IP on your source code and then licence the source code to some company elsewhere to lower their corporate taxes. You also cannot sell services to your own company elsewhere to lower their corporate taxes. You also cannot buy products from your company elsewhere at ridiculously low costs to lower corporate taxes there. And transaction that could be used to lower taxes elsewhere is not allowed.

 

[agentsriba]

So creating my own software and then asking for a subscription to use it should be permitted or that is in scope of ES. I won’t sell it to affiliated companies

 

[daniels27]

So creating my own software and then asking for a subscription to use it should be permitted or that is in scope of ES. I won’t sell it to affiliated companies

It is risky. Just use a US LLC with a director in an offshore jurisdiction. It is cheaper and less risky.

 

[agentsriba]

It is risky. Just use a US LLC with a director in an offshore jurisdiction. It is cheaper and less risky.

Recommendations about cost-effective directorship services? Which jurisdiction should I look into? Do you think Philippines is a good one?

 

[daniels27]

Recommendations about cost-effective directorship services? Which jurisdiction should I look into? Do you think Philippines is a good one?

Yes, definitely cheap. I think you can easily find somebody who can do it for very little. Maybe philipino domestic helpers in Singapore could work too.